THE SENATE

Hon. Sharon Carstairs (Leader of the Government): Honourable senators,
I rise today to congratulate a former colleague of mine for his election victory
yesterday in the British Columbia riding of Surrey-Panorama Ridge. Gulzar Cheema
was elected as part of the new Liberal government in that province, with a
resounding 58 per cent of the vote. Gulzar is a doctor by profession.

This is not the first time Dr. Cheema has held elected office. He served as
the opposition health care critic under my leadership in the Manitoba
legislature. He was first elected in Manitoba in 1988 and again in 1990. In
1993, he and his family moved to British Columbia to be with other family
members, most particularly his parents who had come over from India.

Dr. Cheema brings with him a sense of conviction and commitment, which will
greatly benefit those he represents. The people in Surrey- Panorama Ridge have
elected a person who will work tirelessly on their behalf and will stand by his
values.

To quote Gulzar:

You can become a citizen of a country and then a public servant. That's a
privilege. So I must honour the privilege by making the most of this
opportunity.

I congratulate Gulzar, Premier-elect Gordon Campbell, and the rest of those
who were elected yesterday. I wish them the very best of luck.

Hon. Lowell Murray: Honourable senators, yesterday, the government
announced that the Prince coal mine in Cape Breton will close this fall. Another
440 Cape Bretoners will be unemployed. This is the end of coal mining under the
federal Crown agency known as the Cape Breton Development Corporation.

Perhaps, as the government suggests, this was inevitable. Perhaps there was
no alternative. Perhaps, but how would we know? Parliament has been kept in the
dark.

Last June, we passed Bill C-11 to authorize the government to privatize
Devco. At the Senate committee, we all had serious reservations about handing
over to the cabinet the authority to dispose of this Crown corporation without
any provision for parliamentary oversight, let alone approval. We stated in our
report that we would review the terms of any sale. We intended to recall the
minister for this purpose.

A curtain of silence and secrecy was then brought down on Devco. The public
was informed that negotiations with one prospective buyer, then another, had
failed. Then, yesterday, Mr. Goodale flew into Cape Breton for his photo-op to
announce that the government was giving up. Still, not a word to Parliament,
which in 1967, on the initiative of the Pearson government, created Devco.

Who is calling the government to account, to defend its actions and to
outline its future intentions? Every time a mine closes, the government
announces another top-up to an economic development fund. There are more direct
ways of creating jobs and ensuring economic stability.

When the Mulroney government closed the Canadian Forces base in Summerside,
Prince Edward Island, we put a GST centre there and an industrial park. We took
similar steps in Chatham, New Brunswick, and other parts of the country.

The present government has it within its power to relocate federal agencies
to Cape Breton. Two rookie Liberal MPs, elected last fall, will not call the
government to account. They are silent in the interests of caucus solidarity.

As the last of the coal miners trudge out of the pits to an uncertain future,
they do not even have the satisfaction of knowing that the government will have
to answer to Parliament for what it has done.

Wherever you come from, honourable senators should know that the way in which
this painful human experience is happening is directly related to the
dysfunction of our parliamentary institutions. Having demonstrated yet again its
contempt for Parliament, the government should not be surprised to find
Canadians despairing of the institution.

Hon. Jean-Robert Gauthier: Honourable senators, Dyane Adam, the
Commissioner of Official Languages, has asked the Quebec Superior Court to
intervene in the court challenge by 19 municipalities of Quebec's Bill 171,
which relates to their merger into a mega-city, "Montreal, one island, one
city."

Honourable senators must be aware that, like her predecessors, the
Commissioner of Official Languages is often called upon to appear in court to
defend the rights of official-language minorities when they are being
threatened. This is her role, her duty even.

Yesterday, Ms Adam and the Office of the Commissioner of Official Languages
intervened in Toronto before an Ontario court in the Montfort case. As
honourable senators are aware, this relates to the Ontario government's decision
to close the only French-language teaching hospital in Ontario.

Ms Adam is also an intervener in Moncton, New Brunswick at this time, in
connection with the delivery of French-language services by the municipality.

Quebec Premier Landry is scandalized at what he calls "Commissioner Adam's
interference in an area of provincial jurisdiction."

He would like to put a wall, or a moat, around Quebec, around what he calls
the Quebec nation. You are wrong, Mr. Landry. We know he is out to stir up
trouble. He asks:

Do I send Quebec's Deputy Minister of Finance to interfere in Ontario's
finances?

Really now, Mr. Landry! How about explaining to the French Canadians of
Alberta and elsewhere why Quebec was opposed in the courts to French-only
schools in Alberta?

Incidentally, it is not the federal government that is intervening in the
municipal mergers, including in Montreal. It is an officer of Parliament, not of
the government. The Commissioner of Official Languages is appointed by the
Parliament of Canada. She is not a senior public servant, as Mr. Landry would
have it. She is a language ombudsman with the mandate of defending official-language minority communities. Her mandate is to intervene when the linguistic
duality of the country is threatened.

(1340)

Just like she was justified in supporting the Montfort Hospital, Ms Adam is
justified in defending the rights of Quebec's anglophone minority. It is the
same thing when she must make Ontario's anglophone majority understand that it
is unfair to close the only hospital in Ontario where French is the working
language. I should point out that Montfort Hospital provides services in both
official languages to its patients.

Ms Adam is absolutely right to defend Quebec's anglophone minority. She must
protect and preserve rights that have been held for over 134 years. This is what
Canada is all about, Mr. Landry.

A former Premier of Quebec coined the following sentence:

Quebec must be as French as Ontario is English.

The only problem with this statement is that the provinces must respect the
linguistic rights held by official-languages minorities.

Talk about a double standard. Come on Mr. Landry! One country, Canada, and
two official languages, no more, but no less.

Hon. Lois M. Wilson: Honourable senators, tomorrow, May 18, marks the
twenty-first anniversary of the pro-democracy movement in South Korea under the
leadership of current President Kim Dae Jung. It continues to be a significant
historic event for that country and for Canada's relationships with it.

After the division of the Korean Peninsula, the people of that country
experienced a variety of regimes, including two brutal dictatorships. Over the
years, university students took the lead in restoring democracy to their
troubled country, many paying for it with their lives. On May 18, 1980, a
massacre of students in the provincial city of Kwang-ju galvanized Korean
citizens. The incredible agony and courage of students in those days turned the
tide to eventually depose the dictatorships and establish a democratic regime.

Canadian parliamentarians have a special place in that history. In November
1980, current President Kim Dae Jung was in prison and under death sentence for
being in the forefront of leadership of the pro-democracy movement. In the
Canadian House of Commons, Bill Clarke, a sitting member from Vancouver, said:

I move that the House express its serious concern over the action of the
military court in sentencing to death Kim Dae Jung, and that this House implore
President Chun to use his ultimate executive power to secure the release of Mr.
Kim.

The motion passed unanimously and after Canadian government internvention,
Kim Dae Jung was released. The story has some parallels to that of Nelson
Mandela.

Honourable senators, I speak to this matter today to illustrate the
importance of international solidarity among parliamentarians of democratic
countries. Supporting South Korea currently, and its Sunshine Policy toward the
Democratic Peoples Republic of Korea, the Canadian government announced
diplomatic relationships with the DPRK on February 6 this year. On the occasion
of remembering the history of this troubled peninsula, we look for an exchange
of parliamentarians with the DPRK at an early date. This would contribute
greatly to the beginning of democracy in that so-called rogue state.

The Hon. the Speaker: Honourable senators, I wish to draw to your
attention the presence in the gallery of a former senator, former Minister of
Agriculture and former member of the House of Commons, the Honourable Eugene
Whelan.

Hon. Jack Austin, Chair of the Standing Committee on Privileges,
Standing Rules and Orders, presented the following report:

Thursday, May 17, 2001

The Standing Committee on Privileges, Standing Rules and Orders has the
honour to present its

THIRD REPORT

Your Committee, which is authorised by the Senate, pursuant to Rule
86(1)(f), to propose amendments to the rules for consideration by the Senate,
respectfully requests that it be empowered to adjourn from place to place
within and outside Canada.

Pursuant to Section 2:07 of the Procedural Guidelines for the Financial
Operations of Senate Committees, the Budget submitted to the Standing
Committee on Internal Economy, Budgets and Administration and the report of
said Committee are appended to this report.

Respectfully submitted,

JACK AUSTIN, P.C.

Chair

(For text of report, see today's Journals of the Senate, p. 591.)

The Hon. the Speaker: Honourable senator, when shall this report be
taken into consideration?

On motion of Senator Austin, report placed on the Orders of the Day for
consideration at the next sitting of the Senate.

Hon. Lowell Murray, Chairman of the Standing Senate Committee on
National Finance, presented the following report:

Thursday, May 17, 2001

The Standing Senate Committee on National Finance has the honour to present
its

FIFTH REPORT

Your Committee, to which was referred Bill S-23, An Act to amend the
Customs Act and to make related amendments to other Acts, has, in obedience to
the Order of Reference of Thursday, May 3, 2001, examined the said Bill and
now reports the same with the following amendments:

1. Page 6, Clause 11: Add after line 32, the following:

"11.2 (1) The Minister may designate an area as a customs controlled
area for the purposes of this section and sections 11.3 to 11.5 and 99.2 and
99.3.

(2) The Minister may amend, cancel or reinstate at any time a designation
made under this section.

11.3 No owner or operator of a facility where a customs controlled area
is located shall grant or allow to be granted access to the customs
controlled area to any person unless the person

(a) has been authorized by the Minister in accordance with regulations
made under section 11.5; or

(b) is a prescribed person or a member of a prescribed class of
persons.

11.4 (1) Subject to subsection (2), every person leaving a customs
controlled area, other than for the purpose of boarding a flight with a
destination outside Canada, shall

(a) present himself or herself in the prescribed manner to an officer
and identify himself or herself;

(b) report in the prescribed manner and make available to the officer
any goods that he or she has acquired through any means while in the
customs controlled area; and

(c) answer truthfully any questions asked by an officer in the
performance of his or her duties under this or any other Act of
Parliament.

(2) Subsection (1) does not apply to

(a) persons who are required to present themselves under section 11 or
report goods under section 12; or

(b) prescribed persons or members of prescribed classes of persons in
prescribed circumstances.

11.5 The Governor in Council may make regulations

(a) respecting the authorization of persons under paragraph 11.3(a);

(b) prescribing persons or classes of persons who may be granted access
under paragraph 11.3(b);

(c) respecting the circumstances in which an authorization under
paragraph 11.3(a) may be amended, suspended, renewed, cancelled or
reinstated;

(d) respecting the manner in which a person must present himself or
herself under paragraph 11.4(1)(a) and report goods under paragraph
11.4(1)(b); and

(e) prescribing for the purposes of paragraph 11.4(2)(b) persons or
classes of persons who are exempt from the requirements imposed by
subsection 11.4(1) and the circumstances in which they are exempted.".

2. Page 8, clause 17: Replace, in the French version, line 33 with the
following:

4. Page 44, clause 58: Replace, in the French version, line 6 with the
following:

"la décision de cette cour ou, en cas de".

5. Page 65, clause 59: Replace lines 41 and 42 with the following:

"accordance with article RE 601 of the Letter Post Regulations of the
Universal Postal".

6. Page 66, clause 60: Replace, in the French version, line 12 with the
following:

"(b)examiner les marchandises qu'elle a impor-".

7. Page 66, clause 60: Add after line 16 the following:

99.2 (1) An officer may search any person leaving a customs controlled
area, other than a prescribed person or a member of a prescribed class of
persons who may be searched under subsection (2), if the officer suspects on
reasonable grounds that the person has secreted on or about their person
anything in respect of which this Act or the regulations have been or might
be contravened, anything that would afford evidence with respect to a
contravention of this Act or the regulations or any goods the importation or
exportation of which is prohibited, controlled or regulated under this or
any other Act of Parliament.

(2) An officer may, in accordance with the regulations, search any
prescribed person or member of a prescribed class of persons leaving a
customs controlled area.

(3) An officer who is about to search a person under this section shall,
on the request of the person, immediately take that person before the senior
officer at the place where the search is to be conducted.

(4) A senior officer before whom a person is taken by an officer shall,
if the senior officer agrees with the officer that under subsection (1) or
(2), as the case may be, the person may be searched, direct that the person
be searched or, if the senior officer does not so agree, discharge the
person.

(5) No person may be searched by an officer who is not of the same sex
and, if there is no officer of the same sex at the place at which the search
is to be conducted, an officer may authorize any suitable person of the same
sex to conduct the search.

99.3 (1) An officer may, in accordance with the regulations and without
individualized suspicion, conduct a non-intrusive examination of goods in
the custody or possession of a person leaving a customs controlled area.

(2) An officer may examine any goods in the custody or possession of a
person leaving a customs controlled area and open or cause to be opened any
baggage, package or container and take samples of the goods in reasonable
amounts, if the officer suspects on reasonable grounds that this Act or any
other Act of Parliament administered or enforced by the officer or any
regulations made under it have been or might be contravened in respect of
the goods.

(3) An officer may, at any time, open or cause to be opened, inspect and
detain any baggage, package or container found abandoned in a customs
controlled area.

99.4 The Governor in Council may make regulations

(a) prescribing persons or classes of persons who may be searched under
subsection 99.2(2);

(b) respecting, for the purposes of subsection 99.2(2), the
circumstances and manner in which searches are to be conducted and the
types of searches that may be conducted; and

(c) respecting, for the purposes of subsection 99.3(1), the manner in
which examinations are to be conducted and the machines, instruments,
devices or other apparatuses or classes of machines, instruments, devices
or apparatuses that may be used to conduct examinations.".

8. Page 69, clause 61: Replace, in the English version,

(a) lines 5 and 6 with the following:

"investigate an alleged offence under any Act of Parliament or of the
legislature of a province subject to";

(b) lines 10 and 11 with the following:

"respect of the alleged offence may be taken, if that official
believes on reasonable grounds";

(c) line 13 with the following:

"offence and will be used in the";

(d) line 15 with the following:

"offence, solely for those purposes;"; and

(e) lines 30 and 31 with the following:

"(ii) a person whom that official has reasonable grounds to believe
may have committed an".

9. Page 78, clause 68: Replace lines 11 to 14 with the following:

"section 110, cancel or reduce a penalty assessed under section 109.3 or
an amount demanded under section 124 or refund an amount received under any
of sections 117 to 119 within".

10. Pages 85 and 86, clause 77: Replace lines 40 to 47 on page 85 and lines
1 to 9 on page 86 with the following:

"77. Section 141 of the Act is replaced by the following:

141. (1) The Commissioner, on application by a person whose interest in a
conveyance detained under subsection 97.25(2) or in goods or a conveyance
seized as forfeit under this Act has been determined under section 139 or
ordered under section 139.1 or 140 to be unaffected by the seizure or
detention, shall direct that

(a) in the case of goods or a conveyance the forfeiture of which has
become final, the goods or conveyance, as the case may be, be given to the
applicant; and

(b) in the case of a conveyance detained under subsection 97.25(2), the
conveyance be given to the applicant.

(1.1) If goods or a conveyance that is to be given to the applicant has
been sold or disposed of, an amount calculated on the basis of the interest
of the applicant in the goods or conveyance at the time of the contravention
or use, as determined under section 139 or ordered under section 139.1 or
140, shall be paid to the applicant.

(2) The total amount paid under subsection (1.1) in respect of goods or a
conveyance shall, if the goods or conveyance was sold or otherwise disposed
of under this Act, not exceed the proceeds of the sale or disposition, if
any, less any costs incurred by Her Majesty in respect of the goods or
conveyance, and, if there are no proceeds of disposition, no payment shall
be made pursuant to subsection (1.1).".

11. Pages 90, clause 88: Replace line 34 with the following:

"taux déterminé, calculés sur les".

Respectfully submitted,

LOWELL MURRAY

Chairman

The Hon. the Speaker: Honourable senators, when shall this report be
taken into consideration?

On motion of Senator Murray, report placed on the Orders of the Day for
consideration at the next sitting of the Senate.

Hon. Lorna Milne: Honourable senators, I have the honour to table the
fourth report of the Standing Senate Committee on Legal and Constitutional
Affairs which deals with the Chief Electoral Officer's report for 2000 on the
thirty-seventh general election held November 27, 2000.

Hon. Lorna Milne, Chair of the Standing Senate Committee on Legal and
Constitutional Affairs, presented the following report:

Thursday, May 17, 2001

The Standing Senate Committee on Legal and Constitutional Affairs has the
honour to present its

FIFTH REPORT

Your Committee, to which was referred Bill C-12, An Act to amend the Judges
Act and to amend another Act in consequence, has, in obedience to the Order of
Reference of May 9, 2001, examined the said Bill and now reports the same
without amendment.

Respectfully submitted,

LORNA MILNE

Chair

The Hon. the Speaker: Honourable senators, when shall this bill be
read the third time?

On motion of Senator Milne, bill placed on the Orders of the Day for third
reading at the next sitting of the Senate.

Hon. Serge Joyal: Honourable senators, I have the honour to present
Bill S-27, to authorize the Imperial Life Assurance Company of Canada to apply
to be continued as a company under the laws of the Province of Quebec.

Bill read first time.

The Hon. the Speaker: Honourable senators, when shall this bill be
read the second time?

On motion of Senator Joyal, bill placed on the Orders of the Day for second
reading on May 29, 2001.

Hon. Serge Joyal: Honourable senators, I have the honour to present
Bill S-28, to authorize Certas Direct Insurance Company to apply to be continued
as a company under the laws of the Province of Quebec.

Bill read first time.

The Hon. the Speaker: Honourable senators, when shall this bill be
read the second time?

On motion of Senator Joyal, bill placed on the Orders of the Day for second
reading on Tuesday, May 29, 2001.

Hon. J. Michael Forrestall: Honourable senators, my question is
directed to the Leader of the Government in the Senate. She will recall that
yesterday I had asked specifically if the new basic vehicle requirement
specification would be or had been changed to suit Eurocopter. I asked the
question because I had heard Eurocopter was very concerned and, indeed, were
claiming that the standards were too high.

I have reviewed the requirement specification for the basic vehicle, and the
standards may have been lowered. Endurance or the length of time the helicopter
must stay airborne has been changed from the Maritime helicopter requirement
specification of two hours and 50 minutes, plus a 30-minute reserve, to two
hours and 20 minutes, plus a 30-minute reserve.

If analysis indicates that this is a reduction, if the requirement has in
fact been changed, might I ask if it was done to accommodate Eurocopter?

Hon. Sharon Carstairs (Leader of the Government): Honourable senators,
Senator Forrestall has asked a very interesting question. It is also a very
specific one. I thank him again for sending me a copy of the question earlier. I
must say to the honourable senator that I do not know whether an ISA 15 standard
or an ISA 20 standard are, in fact, two different terms or whether the timing
would be changed accordingly.

However, as I indicated to the honourable senator yesterday, I will look into
whether the specification has been changed. I will get that information for him
as quickly as possible.

Senator Forrestall: Honourable senators, I have in my possession a
chart from the 1999 statement of requirements for the Maritime helicopter. It
states that two hours and 20 minutes for hot weather operations borders between
high and moderate risk of failure. Maritime helicopter with limited endurance of
two hours and 20 minutes would fail at its missions 50 per cent of the time. Why
was this requirement lowered, if not for Eurocopter? There is no other reason
that comes to mind or that I have been able to unearth for such a dramatic
change.

Senator Carstairs: Honourable senators, Senator Forrestall in his
original question, and I repeat his words, said, "standards may have been
lowered." What I have agreed to do this afternoon is to examine with staff and
the Department of National Defence whether those specifications have indeed been
lowered, and any reasons for such a lowering.

Hon. J. Michael Forrestall: Honourable senators, could I conclude by
asking whether the Leader of the Government in the Senate — and I know of her
concern in this regard — will now take the initiative and ensure that the
department give her a full and adequate briefing with respect to these matters?

Hon. Sharon Carstairs (Leader of the Government): Honourable senator,
I had discussions with staff this morning. It was agreed that a contact call
should be made to see if there is any updated information over what I had
earlier been given.

Hon. Noël A. Kinsella (Deputy Leader of the Opposition): Honourable
senators, I rise on a supplementary question. The buying of helicopters is not
an everyday occurrence. Listening to the series of questions raised by the
Honourable Senator Forrestall, I was trying to understand some of the dimensions
of these inquiries.

What are the politics of this matter? Where are Eurocopter's bases of
interest in Canada? Is it not true that Eurocopter and its family of companies
is located in the area that is represented by the Deputy Prime Minister?

Hon. Sharon Carstairs (Leader of the Government): Honourable senators,
I do not have at my fingertips the location of Eurocopter. However, I can assure
the honourable senator that decisions about the Maritime Helicopter Project are
not based on whose constituency the particular company happens to be located in,
even if that constituency is that of the Deputy Prime Minister.

Senator Forrestall: Want to bet?

Senator Kinsella: I thank the honourable senator for her answer. I
know that the minister will be first to defend that principle.

Hon. Noël A. Kinsella (Deputy Leader of the Opposition): Honourable
senators, there appears to be a change in the statement of requirements put out
through the bid process. There is a reduction in the standard in terms of
endurance, how long these helicopters can stay in the air. In 1967, the Sea King
that we are replacing had an endurance of some three hours. The endurance of
these new helicopters, according to the statement of requirements, as I
understand it, has been reduced to two hours and twenty minutes, which is less
than what the Sea Kings were. This reduction seems to be occurring because
Eurocopter cannot fly for three hours. Perhaps the minister could give us some
assurance that the reduction in flying time is not being done to favour
Eurocopter.

Hon. Sharon Carstairs (Leader of the Government): Honourable senators,
we have adjusted our "may" to a "has," and that is unfortunate. Even Senator
Forrestall in his question was very careful to stay "the standard may have
changed." We do not know if it has changed. I will try to get to the bottom of
that, and I hope to have an answer by the time we are back after the break.

Hon. Jean-Robert Gauthier: Honourable senators, my question is
addressed to the Leader of the Government in the Senate. It concerns an issue I
raised during Senators' Statements. The papers today inform us that there is a
war between Ms Dyane Adam, the Official Languages Commissioner, and Mr. Bernard
Landry, the Premier of Quebec, regarding Ms Adam's request to the courts in
Quebec to be heard on this question of Bill 171. I wanted to ask the minister if
she would inquire of the Minister of Justice whether the federal government will
ask to intervene in this case before the courts so that we know exactly where we
stand on this issue. The question is simple: Will the Minister of Justice take
action to defend the constitutional rights of the English-speaking minority?
Section 16.3 of our Charter of Rights and Freedoms is clear. Will the minister
inquire of the Minister of Justice and bring to the house some information on
the matter?

[Translation]

Hon. Sharon Carstairs (Leader of the Government): I thank the
honourable senator for his question. The mandate of the Commissioner of Official
Languages includes promoting French and English throughout Canadian society.

[English]

That has to be clear. The mandate of the Official Languages Commissioner is
equally strong in the province of Quebec as it is in every other province and
territory of this country.

As to the specifics of the question, I will put it to the Minister of Justice
and try to get back to the honourable senator as quickly as possible.

Hon. Douglas Roche: Honourable senators, my question is directed to
the Leader of the Government in the Senate.

As is well known, a U.S. team discussed with Canadian officials this week the
proposed U.S. missile defence system, and the Canadian government is reserving
its position pending further study.

Did the U.S. team leave any written material with the Canadian officials? If
so, can the minister make that material available to the Senate so that senators
can also study what is being proposed in this matter of overarching importance
in U.S.-Canada relations?

Hon. Sharon Carstairs (Leader of the Government): Honourable senators,
we know that the meeting was held. We know that discussions took place. Whether
paper was transferred from one side to the other, I have no knowledge. Whether
that paper is confidential, I have no knowledge. However, I will inquire as to
both aspects of that question.

Senator Roche: Honourable senators, I thank the minister for her
undertaking to inquire. If there is material, I hope the documents will be
released in the spirit to which the Prime Minister referred in the House of
Commons on May 15, when he said that the briefings given by the Canadian
officials following the meetings with the U.S. officials should be made
available to parliamentarians as well as to the public, so there can be an
informed debate in our country before the government takes this decision. I
thank the minister and I ask her to come back to me on this point, if she would.

Hon. Douglas Roche: Does the government plan to hold consultations
with other countries that will be affected by the U.S. plans? I have in mind our
NATO allies in Europe and also Russia and China. The views of all these
countries are extremely important. Is Canada searching them out?

Hon. Sharon Carstairs (Leader of the Government): The Government of
Canada has been clear. It wants to know the positions of other countries with
respect to ballistic missile defence, which has been proposed in very
preliminary form by the United States. We all have to bear in mind that it is,
at the present time, in very preliminary form. Clearly, it is a good indication
of our relationship with the United States that that kind of consultation is
taking place at the beginning of the process and not down the road after
decisions have been made by the United States and then brought to the table with
Canada.

As to whether these discussions will take place, one can only assume that the
only way the Canadian government would obtain the position of the other
countries would be to engage in dialogue with them.

Hon. Douglas Roche: The former U.S. National Security Adviser to the
President, Samuel Berger, said on television that the U.S. missile defence
proposal would likely cost U.S.$100 billion. What would be the Canadian share of
that astronomical amount? How can Canada consider putting any money into this
scheme when we cannot even afford to supply our armed forces with the equipment
that they need right now?

Hon. Sharon Carstairs (Leader of the Government): With the greatest of
respect to the honourable senator, that is an extraordinarily premature
question. First, the Americans have not decided they will even go this route.
Certainly, no cost estimates have been developed, since they do not know which
direction they particularly want to take.

Senator Kinsella: They have a new National Security Adviser.

Senator Carstairs: They have not asked for Canada's participation at
the present time. To start talking about percentages and amounts of money is way
down the line from today's discussion.

Senator Roche: Honourable senators, any proposal that has a potential
to affect the Canadian taxpayer, as this one does, is certainly not premature to
discussion in the early stages, and I want to respectfully offer that as a view
for the Canadian government to take under consideration.

Hon. A. Raynell Andreychuk: Honourable senators, I am pleased with the
answer that the Leader of the Government gave with respect to the consultations.
Since we are not sure what the concept of missile defence is — there seem to be
various theories — we have no idea what the costs will be. We have no
understanding of what the implications may be to NATO and NORAD and our
involvement there. Will these consultations be formalized in such a way that we
can be assured that the Americans will regularly consult us? Will we set out an
agenda of our concerns, as opposed to getting involved in the costs and concept,
to ensure that, once they have the concept structured and some costs attached
thereto, we are involved from the start, as the minister has said, in those
things that matter to us? Is there a more formalized consultation process? Are
we asking for that, if it is not in place?

Hon. Sharon Carstairs (Leader of the Government): Honourable senators,
the honourable senator puts forward some interesting questions. She has, I
think, encapsulated in her opening statement some of the fog in which we are all
living at the present time.

(1410)

She is correct when she asks: What is this ballistic missile defence system?
I do not think any of us know, including, at the present moment, the Americans.
They are not exactly sure what it means.

There are serious concerns for the implications not only to NORAD and NATO,
but for the anti-ballistic missile treaty. What are the long-term financial
implications?

The meetings that took place this week, from both the Canadian and the
American perspectives, were preliminary in nature. Both sides indicated that.
They said it was a good beginning and that it was the start of a consultation
process. President Bush has stated clearly and emphatically that he will consult
extensively with allies. We want to be part of that discussion but, ultimately —
and this is the point that must be borne in mind — any Canadian decision would
only be taken after an analysis of the new global security framework into which
the United States would fit the NMD system and a comprehensive review of the
implications for Canada.

Hon. A. Raynell Andreychuk: Honourable senators, the dilemma is that
if we wait until we receive all the answers from the Americans, it may be too
late for our input. We have often been confronted with a "yes or no"
situation. Has there be an attempt by the Canadian government to arrange with
the Americans a formal, high-level consultation at every stage?

Hon. Sharon Carstairs (Leader of the Government): Honourable senators,
with respect, I think that is what happened on Tuesday. That was the start.

This is not a "yes or no" situation. The Americans came to Canada saying, "These are some of the ideas we are thinking about and we would like your
input." That is what the Canadian government gave them. The meeting was
extraordinarily premature in the entire process; I mean premature in the sense
that nothing is formally on the table.

We will not be in a position, clearly, to make a "yes or no" decision. We
will be in on this every step of the way.

Hon. Lowell Murray: Honourable senators, my question arises from news
reports to the effect that the CBC is about to enter into a "partnership" with
The Toronto Star daily newspaper. Does the government know anything about
this? Has the government pronounced on it? Will the minister assure the Senate
that, before any such partnership is entered into by our public broadcaster with
any privately owned media company, the government and Parliament will have an
opportunity to pronounce and approve, or otherwise?

Hon. Sharon Carstairs (Leader of the Government): Honourable senators,
I am surprised by the question because I was prepared for Senator Murray to ask
me questions about Devco. Regarding the CBC and some potential partnership with
The Toronto Star, he has caught me completely off guard. I have not heard
anything about it. I will look into the matter on his behalf. I would hope that
vigorous debate would take place before such a merger took place.

Hon. Noël A. Kinsella (Deputy Leader of the Opposition): Honourable
senators, I am sure many of us read yesterday with interest a report in the
media that the Minister of Immigration, Ms Caplan, had established a rule
respecting members of Parliament being able to get two visas for people to visit
Canada. The news item surrounded the Minister of Fisheries and Oceans having
exercised his rights under that ministerial rule to vouch that a couple of
visitors to Canada would return home. They did not return.

The rule also states that, if that situation occurs, the Member of Parliament
will be punished by not getting a visa for someone he wishes to sponsor.

Does that rule also apply to members of this place? Do senators each have two
visas that they could use for visitors? Would the imposition of this penalty
that the Minister of Immigration is imposing on Mr. Dhaliwal apply to senators?
I do not expect the minister to have answers to these questions today, but do we
know how many senators have exercised that right under the Minister of
Immigration's rule?

Hon. Sharon Carstairs (Leader of the Government): Honourable senators,
I am not sure if there is any formal rule or any formal process. All of us who
have day-to-day dealings with members of Parliament know that up to 80 per cent
of their constituency work in certain parts of this country deals with matters
of immigration and visas. It occupies an incredible amount of their time and
their energy. Such questions occasionally come my way, but certainly not as
often as such issues go to the constituency offices of members of Parliament
from my province of Manitoba. We do not have constituency offices, so we do not
see the same impact.

The process has been that all members of Parliament — I underline "all"
members of Parliament — no matter to what political party they belong, can
approach the Minister of Immigration and she will do what she can if she is made
aware of particular issues of hardship, such as funerals or celebratory
occasions like weddings. The visa process can sometimes be facilitated in that
respect.

There are 301 MPs and obviously only so many cases per year can be fast
tracked in this particular issue. As to whether senators have the same
privilege, I have not exercised it. Perhaps others have anecdotal evidence. I
would assume that senators would be treated in exactly the same way as members
of Parliament should they come forward with similar requests.

Hon. Fernand Robichaud (Deputy Leader of the Government): Honourable
senators, I have a delayed answer to a question raised in the Senate by Senator
Stratton on May 1, 2000, regarding the Prime Minister's Office and criteria for
appointments.

The Governor in Council appointments process has become more transparent
and has been opened up significantly.

It is Government practice to advertise most full-time, fixed term positions
in the Canada Gazette. Advertisements in newspapers and specialized
magazines may also be used, depending on the nature of the job.

Since September 1993, 130 advertisements have appeared in the Canada
Gazette. (A list of positions advertised since September 1993 is attached).

The notice of vacancy, the job description and the selection criteria are
prepared in coordination with the organization where the vacancy exists. The
job description and the selection criteria are available upon request.

Applicants' qualifications and experience are evaluated against the
selection criteria developed for the position, and those candidates meeting
the requirements of the position are interviewed.

This process has ensured that highly qualified and competent persons,
determined on the basis of objective merit, are selected for appointment.

Hon. Fernand Robichaud (Deputy Leader of the Government): Honourable
senators, under the heading "Government Business," we would like first to
address Item No. 2, namely second reading of Bill C-26, and then continue with
Items Nos. 3, 4, 5, and 1.

Hon. Sharon Carstairs (Leader of the Government) moved the second
reading of Bill C-26, to amend the Customs Act, the Customs Tariff, the Excise
Act, the Excise Tax Act and the Income Tax Act in respect of tobacco.

She said: Honourable senators, I am pleased to speak in the debate at second
reading of Bill C-26, to amend the Customs Act, the Customs Tariff, the Excise
Act, the Excise Tax Act and the Income Tax Act in respect of tobacco.

On April 5, the Minister of Finance, the Minister of Health and the Solicitor
General announced a new comprehensive strategy aimed at improving the health of
Canadians and reducing smoking, especially among young people.

(1420)

[English]

The new strategy represents the most extensive tobacco control program in
Canadian history. It includes increased spending on tobacco control programs as
well as tobacco tax increases to discourage smoking. Under this strategy, tax
increases are linked to a new tobacco tax structure designed to reduce the
incentive to smuggle. Bill C-26 implements the tax measures in the new tobacco
strategy.

Before discussing these measures, I want to provide some background to this
issue. As honourable senators will recall, Canada faced a serious tobacco
smuggling problem in the early 1990s. Tax-free exports of Canadian cigarettes
were being illegally re-entered into Canada and sold without payment of taxes.
Organized criminal activities related to this smuggling problem were also
increasing.

In response, the government introduced a national action plan to combat
smuggling in 1994. The national action plan introduced a surtax on the profits
of Canadian tobacco manufacturers and a tax on certain exports of tobacco
products, reduced tobacco taxes and increased enforcement measures. The plan has
been very effective in reducing the level of contraband activity and restoring
the legitimate market for tobacco sales. To date, the government has been able
to increase excise taxes on tobacco products five times since the strategy was
put into place.

The new tobacco strategy builds on the action plan of 1994. It provides
Canada with additional measures to deal with the many factors that contribute to
smoking. Bill C-26 implements a new tobacco tax structure to further reduce the
incentive to smuggle tobacco products back into our country and tobacco tax
increases to advance the government's health objectives.

When announcing the new strategy, the Minister of Finance stated:

The government's anti-tobacco strategy will help improve the health of
Canadians by discouraging smoking. By increasing taxes sharply, and
introducing a new tax structure for tobacco, we are taking important steps now
and positioning ourselves to take further steps as need be.

The new tobacco tax structure is designed to reduce the incentive to smuggle
Canadian-produced tobacco products back into Canada from export markets, the
main source of contraband in the past.

The main element of the new tax structure is the replacement of the current
tax on exports of tobacco products with a new two- tiered excise tax on exports
of Canadian-manufactured tobacco products effective April 6, 2001.

In 1994, several exemptions from the export tax were provided to ensure that
Canadian tobacco manufacturers had access to legitimate export markets. For
example, exports up to 3 per cent of a manufacturer's annual production were
exempt from the tax. This threshold was reduced to 2.5 per cent of production in
April of 1999. Under Bill C-26, the threshold is reduced further to 1.5 per cent
of a manufacturer's annual production in the previous calendar year. This
threshold represents the approximate level of exports required to meet the
legitimate demands for Canadian tobacco products abroad, principally in the
United States.

[Translation]

Under the new tax structure, all exports of Canadian tobacco products will be
taxed. This will reduce the incentive to smuggle Canadian-produced tobacco
products back into Canada from export markets. In addition, the new tax will be
two-tiered. A tax of $10 per carton will apply on exports up to the 1.5 per cent
threshold. This tax will be reimbursed on presentation of proof of payment of
foreign taxes. This will avoid double taxation of these products when they are
sold on legitimate foreign markets.

[English]

Exports of Canadian tobacco products over the threshold will be subject to
the current excise duty on tobacco products and a new excise tax that in total
will amount to $22 per carton of cigarettes. There will be no refunds of this
second tier export tax. This measure will reduce the potential for smuggling and
help set the stage for future tobacco tax increases.

The next element of the new tax structure concerns tobacco products sold at
duty-free shops and ship's stores. At present, duty free shops are authorized to
sell certain goods, including tobacco products, tax and duty-free. Tobacco
products may also be sold free of taxes and duties when supplied as ship's
stores. Ship's stores are provided for use by crew and passengers and sold to
passengers through on-board duty-free shops on ships and aircraft with an
international destination.

The government believes that all Canadian brands of tobacco products should
be taxed regardless of where they are sold in order to meet our health
objectives of reducing smoking. As a result, Canadian tobacco products delivered
to duty-free shops and ship's stores, both at home and abroad, will now be taxed
at a rate of $10 per carton of cigarettes effective April 6, 2001.

Further, this bill amends the travellers' allowance to ensure that returning
residents are no longer allowed to bring back tax and duty-free tobacco
products. Effective October 1, 2001, a new duty of $10 per carton of cigarettes
will be imposed on these products when they are imported by returning residents.
Until now, returning residents who have been out of the country for more than 48
hours have been able to bring back one carton of cigarettes tax and duty free as
part of the travellers' allowance. To ensure that Canadian residents are not
subject to double taxation upon returning to Canada with Canadian tobacco
products on which a tax has already been paid, neither this duty nor regular
excise duties and taxes will apply to tobacco products that bear a Canadian
stamp signifying that excise duties and taxes have already been paid. This
change to the travellers exemption will not apply to non-residents.

Honourable senators, allowing Canadians who travel to continue to have access
to low-cost, tax-free tobacco, either through duty-free shops, ship's stores or
under the travellers' exemption, would be inconsistent with the government's
strategy of raising tobacco taxes domestically to achieve its health objective
of reduced smoking. These new measures demonstrate just how serious the
government is about reducing tobacco consumption.

Another key component of the new tobacco strategy involves tobacco tax
increases. Through this bill, the federal government is raising tobacco tax
rates jointly with the five provinces that matched its tobacco tax reductions in
1994 when the national action plan to combat smuggling was implemented. As of
April 6, 2001, the combined federal-provincial tax increases by $4 per carton of
cigarettes sold in New Brunswick, Prince Edward Island, Nova Scotia, Ontario,
and Quebec. This measure will restore federal excise tax rates to a uniform
level of $5.35 per carton on cigarettes for sale in Nova Scotia, New Brunswick
and Prince Edward Island. This is equal to the current federal tax rate in the
provinces that did not reduce taxes jointly with the federal government in 1994.
After this tax increase, only Ontario and Quebec will have cigarette excise tax
rates below the national rate.

Other measures in Bill C-26 include increased taxes on fine-cut tobacco and
tobacco sticks sold across Canada and the elimination of the reduced rate of
federal excise tax on fine-cut tobacco for sale in Ontario.

As I indicated earlier, honourable senators, this is the fifth increase in
tobacco taxes since 1994. Federal revenues from tobacco products will grow by
$200 million annually as a result of these increases.

Another measure in this bill increases the surtax on the profits of tobacco
manufacturers to 50 per cent from the current rate of 40 per cent effective
April 6, 2001. This surtax was initially introduced in 1994 on a three-year
temporary basis as part of the national action plan to combat smuggling. It was
subsequently extended for three years in 1997 and made permanent on February 8,
2000. The surtax currently brings in approximately $70 million annually, and
will now raise an additional $15 million each year.

(1430)

Before concluding, I want to mention that the government is providing
additional resources to help federal departments and agencies, like the RCMP and
the Canada Customs and Revenue Agency, monitor and assess the effectiveness of
the new tax measure in reducing smuggling.

[Translation]

These additional resources will cost $15 million the first year and $10
million a year after that.

Honourable senators, the provisions in this bill reaffirm the government's
commitment to reducing tobacco consumption in Canada.

[English]

The new tobacco tax structure will help reduce smuggling, and the tobacco tax
increases will help advance the government's health objectives to reduce
smoking. This is particularly true in the important area of youth smoking.
Teenagers are sensitive to price increases. Viewed in the light of the
government's other harm-reduction initiatives, the increase in taxes on
cigarettes complements the government's overall strategy to reduce youth
smoking. I believe that the new strategy demonstrates the depth of the
government's commitment to reducing tobacco use.

Endorsements of this new strategy from groups like the Canadian Cancer
Society, the Heart and Stroke Foundation of Canada and the Alberta Tobacco
Reduction Alliance serve to confirm that the government is on the right track to
reducing smoking by Canadians, particularly young Canadians. I encourage
honourable senators to give their full support to this bill.

Hon. Sheila Finestone: Honourable senators, I should like to pose a
question to the Honourable Senator Carstairs.

The report was interesting. It sounds punitive to those who might be
afflicted with this disease. Notwithstanding that, those are huge sums to the
Consolidated Revenue Fund. Will all those new funds be dedicated to promotion
and education particularly targeting our youth, or will some of it enrich the
Consolidated Revenue Fund?

Senator Carstairs: I thank the honourable senator for her question. I
think Senator Finestone was assuming that not all moneys would go into a tobacco
reduction strategy, and she is accurate in that assumption. Not all moneys will
go into such a strategy. Some of the moneys will be used, as I indicated in my
speech, to prevent smuggling. This, of course, is why we developed the original
plan in 1994, when smuggling in certain provinces became so horrendous that it
was felt necessary at that time to reduce the taxes in order to eliminate the
smuggling.

What has happened, I think somewhat to our benefit, is that taxes have gone
up in many of the border American states, which now means that the advantage of
smuggling is much less today than what existed in 1994.

Yes, some of the dollars will end up in general revenues. One would then hope
that in terms of our overall health care strategy, those moneys would find their
way back into health in order to support those who have this unfortunate
addiction.

I think Senator Carstairs will agree with me that our educational programs
for smoking and for drug addiction have been very poor. In particular,
educational programs targeted at young women who smoke have been very poor. I
appreciate that there is no direct connection between this bill and a diversion
of funds — the honourable senator already spoke to that — into educational
programs.

Given the minister's influence in cabinet, would she try to influence
cabinet, and her colleague the Minister of Health and the Prime Minister, into a
momentous program of education? In the drug program, as well as in the tobacco
program, instead of wasting funds on policing and legislation, we should be
educating the public about this problem. The majority of young women who are
smoking are highly intelligent. They are simply not getting educated the way
they should be educated.

Would the honourable senator use her influence in cabinet to do something
about that?

Senator Carstairs: The honourable senator, with his knowledge of
disease, and in particular diseases of the heart, knows the dangers of smoking.
It is a widely held view that smoking only affects the lungs. We all know,
however, that smoking has an impact on a broad number of diseases, heart disease
being one of them, and all of the cardiovascular problems as well.

There have been inadequate education programs, both in the schools and in the
public domain. One of the problems is with respect to teenagers. The early to
the late teenagers, who are most susceptible to the attractions of smoking, and
young women, who are attracted by the fact that smoking may enhance their body
image because it may keep them slimmer, need to be exposed to education.
Unfortunately, they do not like that education to come from teachers, who they
feel are lecturing to them. The experience has been that it is much better if
that education comes via peers, who have had similar experiences or who can
frankly give the message, "I don't want you, my friend, to die." That is a far
more effective message to get out to the young people of this country.

I am pleased to say that, as a result of this policy, an additional $480
million will be spent over five years to enhance programs like the ones the
honourable senator and I have been discussing. I can assure Senator Keon that my
voice at the cabinet table will be very loud on this issue.

Hon. Tommy Banks moved the second reading of Bill C-22, to amend the
Income Tax Act, the Income Tax Application Rules, certain Acts related to the
Income Tax Act, the Canada Pension Plan, the Customs Act, the Excise Tax Act,
the Modernization of Benefits and Obligations Act and another Act related to the
Excise Tax Act.

He said: Honourable senators, it is my pleasure to present Bill C-22, the
proposed Income Tax Amendments Act, 2000, for second reading today.

Tax relief continues to be a priority for this government. From day one of
coming into office, the government has been firmly committed to enhancing
fairness in the tax system. The measures in Bill C-22 are part of that ongoing
commitment. The government's approach to changes in the tax system is based on
four key principles.

The first principle is that our approach to tax reduction must be fair,
beginning with those who most need the relief, that is, middle- and low-income
earners, especially families with children. Second, we will focus initially on
personal income tax, since that is where we are most out of line. Third, we will
ensure that Canada has an internationally competitive business tax system.
Fourth, we will not finance tax relief with borrowed money because that just
means an inevitable return to higher taxes in the future.

As honourable senators know, the government has consistently moved to lessen
the tax burden on Canadians. Once we were able to eliminate the deficit and
start the debt on a downward path, we began to cut taxes for all Canadians. Bill
C-22 is the biggest step forward to date in our tax-cutting effort.

The government promised Canadians in 1999 that it would set out a multi-year
tax plan for further tax reduction. The 2000 budget delivered on that commitment
by making the most important structural changes to the Canadian tax system in
over a decade, with a special emphasis on the needs of families with children.

(1440)

The 2000 budget set out a five-year $58-billion tax relief plan that was
further expanded to $100 billion in last fall's economic statement and budget
update, making this the largest tax cut in Canadian history. Bill C-22
implements the key elements of that five-year tax reduction plan, which will
reduce the federal personal income tax paid by Canadians by 21 per cent on
average. Families with children will receive an even larger tax cut, a reduction
of about 27 per cent on average.

Honourable senators, the measures that are contained in this bill are all
encompassing. Along with the broad-based tax reduction measures, the bill
contains many additional changes to both the personal and business tax systems.

The technical amendments that died on the Order Paper as part of Bill C-43 in
the last Parliament are also part of this bill. Some of the technical amendments
are relieving in nature, some correct technical deficiencies in the act, and
others tighten the administration of the tax system.

This is a very fat bill, as honourable senators all know, and I want to
discuss today the highlights of it. To begin, I wish to point out the personal
income tax changes.

The elements of the five-year tax reduction plan included in this bill reduce
personal income taxes for all Canadians. They increase support for families with
children. They take steps to promote entrepreneurship, economic growth and job
creation in a way that gives Canada an advantage in the new economy.

With respect to personal income taxes, Bill C-22 provides for tax reductions
at all income levels as of January 2001. Canadians will be able to earn more,
income tax free, and more of their income will be taxed at lower rates.

Under the measures proposed in bill, the low- and middle- income tax rates
fall to 16 per cent and to 22 per cent respectively. The top 29 per cent rate is
reduced to 26 per cent for those incomes between $61,000 and $100,000. The top
tax rate of 29 per cent stays in place only for those Canadians earning more
than $100,000. In addition, the 5 per cent deficit reduction surtax is
eliminated as of January 2001.

Bill C-22 also proposes significant enhancements to the Canada Child Tax
Benefit. These changes need to be in place, honourable senators, by July 1 of
this year in order for Canadian children and Canadian families to receive the
full advantage of them. As honourable senators know, the child tax benefit is a
key element of federal assistance to families. It is an income-tested benefit,
made up of the base benefit for low- and middle-income families and the National
Child Benefit supplement for low-income families. This bill raises the maximum
child tax benefit for the first child to $2,372 as of July 1, 2001, well on the
way to the five- year goal of $2,500 per year by 2004. The maximum child tax
benefit for the second child will increase to $2,308 in July of 2004.

Honourable senators, it is imperative that these changes be in place by July
1 of this year if families and children are to receive the full benefits on
time.

Several other changes to the personal income tax regime are specifically
designed to provide tax relief to those who need it most. For example, the bill
increases the amount on which the disability tax credit is calculated from
$4,293, as it is now, to $6,000. It expands the list of relatives to whom the
disability tax credit can be transferred so that it is consistent with the
medical expense tax credit rules. It allows speech language pathologists to
determine eligibility for the DTC with respect to speech impairments. It
increases the maximum child care expense deduction to $10,000 from $7,000 for
children for whom the DTC could be claimed. It raises the amount on which the
caregiver and infirm dependant credits are based to $3,500.

When a principal place of residence is built for people who lack normal
physical development or have severe and prolonged mobility impairments, this
bill proposes that certain incremental costs will be allowed under the medical
expense tax credit.

In addition, under this bill, up to $3,000 in scholarship, fellowship and
bursary income is tax-exempt where it is paid in connection with educational
programs that qualify for educational tax credit. The present rate is $500. That
is a $2,500 increase.

Further, self-employed individuals will now be able to deduct the employer
portion of CPP or QPP contributions that they pay for their own coverage. The
remaining portion will continue to be eligible for a personal tax credit at the
lowest tax rate. This change ensures that self-employed individuals are not at a
disadvantage by comparison with owner-operators. Self-employed individuals would
be able to deduct the employer's share of their CPP or QPP payments.

I mentioned earlier that this bill also contains technical amendments, some
of which were introduced in Bill C-43 in the last Parliament but never passed.
The technical amendments are numerous. Examples of them include clarifying the
tax treatment of certain resource expenditures. In a chain of corporations, a
corporation is controlled by its immediate parent when that immediate parent is,
itself, controlled by another corporation. The tax treatment of certain limited
liability partnerships is also clarified in this bill.

Honourable senators, all of these measures are designed to improve tax
fairness in the operation of our tax system.

I will now discuss some of the changes to the business tax system.

As I said earlier, the government is committed to ensuring that Canada has an
internationally competitive business tax system. Canada needs such a system in
order to prosper in the new global economy. This is important because business
tax rates have a significant impact on the level of business investment, on
employment, productivity, and on wages and incomes.

The five-year tax reduction plan goes a long way towards reaching this goal.
One of the ways it does so is through corporate tax reductions. Under Bill C-22,
federal corporate income tax rates will drop to 21 per cent from 28 per cent for
businesses in the highest-taxed sector, such as high-technology services, to
make them more internationally competitive. These reductions begin to take
effect as of January 1, 2001.

By 2005, the combined federal-provincial tax rate will drop from the current
average of 47 per cent to 35 per cent, which is 5 percentage points lower than
the United States. This will also put our businesses on a more competitive basis
with respect to other G-7 countries.

Another element of the tax reduction plan allows tax deferred capital gains
and rollovers of those capital gains for investments in shares of certain small
and medium-sized active business corporations. The capital gains inclusion rate
also drops to one- half, which will make our top federal-provincial tax rate on
capital gains lower than the comparable United States' combined top rate.

Increasing the employee stock option deduction from one-third to one-half
means that employees in Canada will be taxed more favourably on their stock
option benefits than employees in the United States. We have heard much about
that in the last months; we want to address that imbalance. In addition, Bill
C-22 defers the taxation of certain stock option benefits and allows an
additional deduction for certain stock options shares that are donated to
charity.

Honourable senators, Bill C-22 also includes amendments that accommodate
branches of foreign banks operating in Canada. As a result of Bank Act
amendments in 1999, foreign banks are now allowed to establish specialized,
commercially focussed branches in Canada. Previously, they could only operate
under the aegis of Canadian incorporated subsidiaries. Bill C-22 ensures that a
comparable tax system exists for both Canadian banks and foreign banks with
branches operating in Canada.

Some of the other business tax measures include tax-deferred rollovers for
shares received on certain foreign spin-offs, strengthened capitalization rules,
and a phasing out over a three-year period of the special income tax regime for
non- resident-owned investment corporations.

(1450)

There will also be a temporary 15 per cent investment tax credit for
grassroots mineral exploration; a revised corporate divisive reorganization set
of rules; and an appropriate treatment of foreign exploration and development
expenses in computing foreign tax credits.

Honourable senators, these are just a few examples of the extensive changes
implemented in Bill C-22 in respect of the business income tax system. As with
the personal tax changes, each measure is designed to improve tax fairness in
the operation of our tax system. The technical amendments pertaining to the
business tax system that were included in former Bill C-43, which died on the
Order Paper before the last election, are also extensive.

I will give honourable senators a few important examples. It extends the
additional capital tax on life insurance corporations until the end of 2000. It
ensures that Canadian corporations holding shares of non-resident corporations
through partnerships are not subject to double taxation. The bill also ensures
that shares of one foreign corporation can now be exchanged on a tax- deferred
basis for shares of another. Replacement property rules do not apply to shares
of the capital stock of corporations. The definition of "investment tax
credit" is clarified, as is the tax treatment of resource expenditures and the
rules governing gifts of ecologically sensitive land.

There are three additional measures that I want to highlight today for
honourable senators. They would change the rules governing the taxation of
trusts and their beneficiaries. Many of the changes of these three measures
bridge gaps in the existing income tax law. Bill C-22 addresses the tax
treatment of property that is distributed from a Canadian trust to a
non-resident beneficiary. It also introduces measures that deal with the tax
treatment of bare, protective and similar trusts, as well as mutual fund trusts,
health and welfare trusts and trusts governed by RRSPs and RRIFs. In addition,
it includes new anti-avoidance measures designed to ensure that transfers of
trusts cannot be used to inappropriately reduce tax.

Another part of Bill C-22 concerns the new taxpayer migration rules, which
are also part of our ongoing commitment to greater fairness in the tax system.
Since 1972, Canada has had special tax rules that apply when people give up
Canadian residence, the basic element of which is a "deemed disposition" that
treats emigrants as having disposed of property immediately before leaving. Bill
C-22 clarifies that Canada retains the right to tax emigrants on gains that
accrue during their stay in Canada. It also clarifies the effect of these new
rules on various kinds of rights to future income. The bill allows returning
former residents to generally "unwind" the tax effects of their departure,
regardless of how long they were non-resident.

The final measure of Bill C-22 relates to the 1999 agreement between Canada
and the United States concerning foreign periodicals, about which we have all
heard a great deal. Since the 1960s, the Income Tax Act has precluded Canadian
businesses from deducting advertising expenses, unless they were in a newspaper
or periodical that is at least 75 per cent Canadian-owned and contains at least
80 per cent original Canadian content. As a result of the 1999 agreement between
the United States and Canada, that rule no longer applies to advertisements in
periodicals. Instead, advertising expenses in periodicals with at least 80 per
cent original editorial content will be fully deductible, and those in other
periodicals will be deductible at 50 per cent, regardless of the ownership of
the newspaper or the periodical.

Canadian pension funds and other entities that own Canadian newspapers
qualify as Canadian citizens under the ownership requirements of this bill. That
has been valid since June 1996.

In summary, I want to remind honourable senators that for this government,
fiscal responsibility is fundamental and that tax cuts are essential. At the
same time, the government is committed to maintaining an effective, fair and
technically valid tax system. Bill C-22 meets all of these requirements. Each
measure in this bill adheres to one of the principles of tax fairness to which
our government remains steadfastly committed.

Honourable senators, I encourage you to pass this bill after due deliberation
and examination with alacrity, especially given that Canadian families and
children need the increase that is contained in this bill, which can be made
payable to them on July 1.

Hon. Yves Morin moved the second reading of Bill C-17, to amend the
Budget Implementation Act, 1997 and the Financial Administration Act.

He said: Honourable senators, I am pleased to rise to speak at second reading
stage of Bill C-17, to amend the Budget Implementation Act, 1997 and the
Financial Administration Act.

The amendments to the Budget Implementation Act, 1997 relate to additional
funding for the Canadian Foundation for Innovation to include research outside
Canada and extension of its activities to 2010.

The amendments to the Financial Administration Act relate to the Canada
Pension Plan Investment Board and the borrowing power of federal departments. I
will begin by addressing the additional funding for the Canadian Foundation for
Innovation, but first I will place this measure in context.

Academic research funding has always been, and continues to be, one of the
federal government's foremost priorities. Elimination of the deficit has made it
possible for the government to inaugurate several initiatives for funding
university-based research: a very generous tax scheme for research; additional
funding to the granting councils; creation of the Canadian Institute for Health
Research, a truly innovative model for health research development; $900 million
in funding for the Canada Research Chairs Program, to establish 2,000 research
chairs in Canadian universities; more funding to the centres of excellence; $300
million to Genome Canada; and the creation of the Canadian Foundation for
Innovation, one of the topics of this debate.

[English]

In addition, honourable senators, the government is committed to doubling the
current investment in research and development by the year 2010. That target was
announced in the Speech from the Throne in January 2001.

During its mandate, the government plans to increase its investment in the
granting councils; accelerate Canada's ability to commercialize research
discoveries, and turn them into new products and services; and finally, pursue a
global strategy for Canadian science and technology to put Canada at the
forefront of international research.

These initiatives, including the proposal from the Speech from the Throne,
confirm that funding for university research remains high on the government's
list of funding priorities. The Minister of Finance reinforced this commitment
last fall when he stated:

Over the past four years, this government has introduced an unprecedented
series of strategic initiatives to rebuild the research infrastructure of our
universities, in order to attract and retain the best minds, and to expand their
opportunities here in Canada.

[Translation]

The Canada Foundation for Innovation is part of that series of strategic
initiatives. In order to meet the infrastructure needs of universities and
hospitals, the federal government announced in the 1997 budget the creation of
the Canada Foundation for Innovation and gave it an initial budget of $800
million to ensure the financial support needed to modernize the research
infrastructure of universities, hospitals and research centres in the fields of
health, the environment, the sciences and engineering.

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The 1999 budget injected an additional $200 million. Without these additional
funds, the foundation's grants, distributed in the context of a peer review
process, would have stopped during the year.

The budget for 2000 provided an additional $900 million, while, as a result
of last fall's Economic Statement and Budget Update, an additional $500 million
was injected into the foundation's grants.

[English]

Honourable senators, the foundation's success can be seen in the willingness
of our universities, research hospitals, businesses, voluntary sectors,
individuals and provincial governments to partner with it in order to enhance
Canada's research infrastructure. In most cases, the foundation is able to
provide up to 40 per cent of funding for research infrastructure projects. The
foundation has funded projects in every part of our country, created
opportunities and established new researchers. To date, it has supported 95
research organizations across Canada, including 65 universities, 18 colleges and
12 research hospitals. The provinces, for example, have strongly supported the
participation of their research institutions in the foundation's program, either
by contributing to the project or by establishing complementary funding programs
of their own. Quebec and Ontario, for example, have created funds that match the
foundation's awards.

Bill C-17 legislates an additional $1.25 billion in 2000-01 for the Canada
Foundation for Innovation and extends its activities to 2010. This injection of
$1.25 billion includes $500 million from the October 2000 economic statement and
budget update and a further $750 million that was announced on March 6, 2001, by
the Ministers of Finance and Industry.

The $500 million announced last October will be invested in two ways: $400
million dollars will go to support the operating costs of new awards, and $100
million will help facilitate the participation of Canadian researchers in
international research projects and facilities that offer significant research
benefits to Canada.

The additional $750 million announced in March will build on this funding by
providing additional stability to our universities as they plan their future
research priorities. Together, this increased funding will bring the total
federal investment in the foundation to an amazing $3.15 billion.

That act provides, among other things, for the financial administration of
the Government of Canada, the establishment and maintenance of its accounts and
the control of Crown corporations.

It also establishes the regulatory framework under which the government can
borrow funds, and it ensures that Parliament authorizes the government, or its
agents, to borrow funds.

The first amendment included in the bill concerns the Canada Pension Plan
Investment Board, which was inadvertently removed from section 85(1) of the
Financial Administration Act when the Canadian Wheat Board Act was amended, in
1998.

This oversight means that under the Financial Administration Act, the Canada
Pension Plan Investment Board was subjected to the various provisions of
Divisions I to IV of Part X of that act on the control of Crown corporations and
was in a situation of conflict, since its mandate provides that it operates at
arm's length from the government.

That situation was not created voluntarily, because when the act establishing
the investment board was promulgated, the board had been exempted from the
application of the various provisions of the Financial Administration Act
dealing with the control of Crown corporations.

[English]

Bill C-17 reinstates the Canada Pension Plan Investment Board on the list of
Crown corporations exempt from Divisions I to IV of Part X of the Financial
Administration Act. This exemption protects the independence of the board while
the Canada Pension Plan Investment Board legislation itself provides a strong
accountability regime ensuring that a high standard of audit and reporting is
followed. This change will be retroactive to December 1998 to ensure that the
Canada Pension Plan Investment Board has always operated within the laws of
Canada.

The second amendment reinforces the authority of Parliament over any
borrowing by and on behalf of the Crown. It also strengthens the role of the
Minister of Finance in ensuring the appropriate management of government
indebtedness. This amendment provides for greater certainty that it is
Parliament that must specifically authorize borrowings that are made on behalf
of Canada.

Additionally, Bill C-17 ensures that all borrowings, and not just the
borrowings of money, are covered under section 43 of the Financial
Administration Act and are subject to the supervision of the Minister of
Finance.

[Translation]

In closing, honourable senators, I must point out that the amendments to the
Financial Administration Act are intended to improve its application.

I would also point out that this additional allocation to the Canadian
Foundation for Innovation is implementing the commitment made by the government
to double its present investment in research by the year 2010.

Last October, the Minister of Finance stated as follows:

Success in the new economy will not be determined by technology alone, but by
creating an environment of excellence in which Canadians can take advantage of
their talents, their skills and their ideas.

[English]

The Canada Foundation for Innovation is helping to create this environment
for excellence. The foundation needs this increased funding so that it can
continue to promote research in Canada and inspire new young Canadian
researchers, which I am sure we all agree is an important investment in Canada's
future.

Honourable senators, I urge you to give this legislation your full support.

Leave having been given to revert to Item No. 2 under Government Business:

On the Order:

Resuming debate on the motion by the Hon. Senator Carstairs, P.C., seconded
by the Hon. Senator Robichaud, P.C., for second reading of Bill C-26, to amend
the Customs Act, the Customs Tariff, the Excise Act, the Excise Tax Act and
the Income Tax Act in respect of tobacco.

Hon. Pierre Claude Nolin: Honourable senators, I thank you for having
agreed to set aside the Rules of the Senate and allow me to speak to Bill
C-26 at second reading stage.

The purpose of this bill deserves to be supported. The Senate's role in this
issue cannot be ignored in light of the effective support this institution has
repeatedly given to all measures aimed at slowing the spread of smoking,
particularly among young people.

(1510)

This bill concerns transactions surrounding the sale of tobacco products and
the increase in the tax structure related as well to the sale of these products.
All studies indicate that an increase in the price of tobacco has a direct
effect on young Canadians by dissuading them from starting down the deadly road
of smoking.

We must absolutely and together praise the government's decision to
re-establish a tax structure intended to limit the spread of smoking. Until
1994, we had a serious problem with the reimportation into Canada of tobacco
products originating here. Tobacco manufacturers, because of the tax structure
on the export duties on tobacco products, sold tobacco to the U.S., which came
back into Canada without being taxed. The product, stripped of all its original
taxes, had a very attractive market value. We know the rest.

This bill aims at closing this valve and will enable us to ensure that
tobacco products intended for export are properly taxed in order to prevent the
reimportation into Canada of products that were originally meant for Canadian
consumption.

There is one item I must mention, and we will hear government officials on
this in committee. The bill provides for an increase in the rate of the surtax
on Canadian tobacco manufacturers' profits. This surtax, which the government
created in 1994, generates $70 million annually. The government wants to
increase this surtax in Bill C-26 in order to bring in an additional $15 million
annually, approximately.

Honourable senators, I say "well done," if the $70 million the surtax
generates are properly spent and go to creating programs to reduce the harmful
effects of smoking.

I, personally, do not think this is the case. It reminds me of certain
speeches made in this House early in the debate on another measure to establish
an independent foundation, funded totally independently by government funds,
that would promote a program to reduce smoking among young Canadians, in fact.
It will be interesting to see what becomes of the additional $15 million.

Again, I say "well done," if the government is truly committed to spending
a total of $85 million annually to reduce tobacco consumption among Canadians.
Honourable senators, I urge you to support this bill, so that it can be referred
to a committee for consideration as quickly as possible.

Hon. Noël A. Kinsella (Deputy Leader of the Opposition): Honourable
senators, could Senator Nolin explain whether there is a convergence between
Bill S-15, which went through third reading this week, and the government bill
now before us?

Senator Nolin: Honourable senators, the two bills pursue the same
objectives, but they differ in the means used to achieve these objectives. Bill
S-15 provides for the establishment of a foundation that would deal at arm's
length with the government and whose funding would be totally independent.

Bill C-26 provides that, thanks to the surtax on tobacco products, an annual
amount of $185 million be put into the Consolidated Revenue Fund.

The two bills propose measures that are conducive to making tobacco products
less appealing, particularly for young people who do not have a lot of money. A
pack of cigarettes is much more appealing if it costs $2.50 instead of $6.50.
The two bills try to solve the same problem, but through the respective means of
each authority.

[English]

Senator Kinsella: Honourable senators, with the explanation that there
is a convergence with Bill C-26 and Bill S-15, and given that this bill was
moved in the house by the honourable minister and seconded by our good friend
Senator Taylor, we could therefore expect that the government, given government
solidarity, would support Bill S-15 in the House of Commons.

Hon. Nicholas W. Taylor: If I may ask a question, just to follow
Honourable Senator Nolin's line of reasoning, what does the honourable senator
think will happen if this bill receives Royal Assent? The Senate has already
passed Bill S-15. Is there any conflict in the senator's mind in trying to put
the two bills out at the same time?

Senator Nolin: The answer is no. That answer is based on the amount of
money available from Bill S-15 that will be invested to reduce smoking
prevalence in the younger members of our population. Data from the United States
shows that between $10 and $20 per Canadian per year must be spent to reduce
smoking prevalence in the younger population.

The scheme in Bill S-15 is different. It is apart from the tobacco
manufacturers' surtax, which will provide another $15 million, hopefully to be
spent on the main objective, which is to reduce smoking prevalence among the
total population in Canada. The price of the product will increase, of course,
and provide money to the public treasury. I am interested in seeing the price of
cigarettes rise to a level that will not trigger black market activity.
Reimportation into Canada of Canadian product will be almost impossible, as
there will be a tax on exportation. There will be no interest in reimporting
tobacco products into Canada. What is important is that the price will be
higher. That will reduce the likelihood that younger Canadians will be
interested in commencing to smoke tobacco.

Senator Taylor: Rather than adjourn the debate, honourable senators, I
wish to speak for about five minutes. I wanted to speak on this matter the other
day following Senator Kenny's speech, but he had given us such a huge bale of
hay that I thought there was no use trying to feed the animals another bale.
Today, things have settled down.

I was chairman of the Energy Committee at a time when we travelled across the
country to hold hearings on the tobacco issue. The tobacco bill had been
referred to the Energy Committee. We thought this was an economical way of
killing two birds with one stone or, perhaps, stoning two birds with one
sitting. The point is that we were to get across the country. There was no doubt
in listening to the submissions made by the medical associations in Vancouver,
Edmonton, Calgary, Toronto, Montreal, St. John's, Newfoundland and in Halifax,
as we heard Senator Keon say earlier, that people felt quite strongly that Bill
S-15 was good for three reasons.

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First, it would raise the price of cigarettes, which this bill does as well.
Second, there is a slight variation from Bill S-15 to this bill before us.
Perhaps the committee destined to study the matter will be able to iron it out.
Bill S-15 had a hands-off approach to the decision-making body. As a matter of
fact, at the moment the Energy Committee is studying an arm's-length body which
was set up to invest $100 million into the sustainable development fund. The
government has even appointed directors and started listening, which makes it an
entirely different issue as to political correctness. The point of the matter is
that governments often do set up arm's-length organizations to go after such
issues.

Those who made presentations to us wanted an arm's-length organization. That
is because, in 1994, I believe, we were supposed to put up $68 million. The idea
was to increase the sum to $100 million in three or four years for education.
Unfortunately, it decreased to zero in three to four years because that money
was used to balance the budget.

The third reason they argued, as Senator Nolin has pointed out, is that to be
totally effective you have to spend about $12 per capita, and perhaps as high as
$15 per capita. That amount was determined as a result of the testimony by
Americans who appeared before the committee. They said that if you spend $2 or
$3, nothing will happen. However, if you spend between $12 and $18 you are able
to reduce smoking among youth anywhere from 25 to 28 per cent, down to as low as
9 or 12 per cent. This is a terrific cut. As a matter of fact, the
representative from California pointed out to us that the savings to the
Government of California were $3 for every $1 spent on education. Time and again
we were warned that spending less than $3 per capita, which this bill
contemplates, was wasting money. In a speech the other day I said it was like
putting 10 pounds of air in a tire that needs 38 pounds. In other words, you
will be in just as much trouble as if you had not put any money into it at all.
Perhaps air is an unfortunate example to use with a bunch of politicians.
Nevertheless, it was an analogy I thought of at the time.

This bill has good intentions, but there are two things I do not like about
it. First, it leaves the money that is raised from the sale of a drug that kills
30,000 to 40,000 people per year in Canada — a drug to which children younger
than teenagers are addicted — in the hands of politicians. Perhaps I have spent
too many years in opposition. However, that is one of the things about the bill
that worries me. Perhaps we can get around that someway. I hope we can.

The second item about this bill that worries me is the amount of money we are
spending. What I am worried about is that after two or three years they will
pull out the stats and say, "We have only cut smoking by teenagers from 25 per
cent to 20 per cent, or not at all. There is no use putting any money in it."
In other words, we could be worse off than where we are now.

Nevertheless, I will not stand in the way of the bill going to committee. I
have not had a chance to speak to this bill before. Since the taxpayer paid a
certain amount of my travelling expenses across the country as a member of the
committee to listen to evidence on tobacco and the entire idea of youth and
their use of tobacco, I certainly thought I had a responsibility to speak to it.
Outside of making a formal report to the Senate, I chose to speak to the bill
today in order to make a report on the findings.

The Hon. the Speaker pro tempore: Is the house ready for the
question?

Hon. Senators: Agreed.

The Hon. the Speaker pro tempore: Is it your pleasure,
honourable senators, to adopt the motion.

Hon. Catherine Callbeck moved the second reading of Bill C-14,
respecting shipping and navigation and to amend the Shipping Conferences
Exemption Act, 1987 and other Acts.

She said: Honourable senators, transportation has always played a vital role
in our history, and it continues to do so today. The current act is, without
exaggeration, antiquated. The act came into law in 1936 and was based on the
1896 British merchant shipping law.

The Canada Shipping Act is the principal piece of legislation governing
personal safety and environmental protection in the marine sector. No one can
deny the pressing need to review and to overhaul it.

Transportation Canada data indicates that, in 1999, the civil marine industry
directly employed approximately 31,000 people and shipped a total of 334 million
tonnes of cargo. The shipping industry moved imports and exports worth $83
million in 1999. Despite this impressive record, Canada's shipping industry will
find it increasingly difficult to compete internationally unless we implement
transportation policies based on sound, modern legislation.

Honourable senators, Bill C-14 is the result of five years of work by the
Department of Transport, in conjunction with the Department of Fisheries and
Oceans, the Department of Industry and other affected parties. Numerous
consultations on the bill have occurred during the process, including the
release of a draft bill in June 1999.

The consultative process is an excellent example of cooperation between the
government and marine communities. Everyone had a chance to participate in the
review of this important legislation, from commercial shipping in supertankers
to the recreational boating community. This bill establishes the legal framework
that focuses on safety and the promotion of a healthy environment, both of which
are high priorities for Canadians.

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Honourable senators, the challenge is to maintain safety and protect the
environment from the many threats while continuing to promote a strong and
viable shipping industry.

The bill we have before us today is tangible proof of the government's
leadership and our commitment to the marine sector.

The objectives of Bill C-14 are stated clearly in Part 1 of the bill. They
are threefold: first, to protect the health, safety and well- being of
individuals; second, to protect the marine environment; and, third, to encourage
viable, effective and economical marine transportation and commerce.

To support these objectives, a complete reform of the Canada Shipping Act was
undertaken. This reform had three goals: first, to simplify the legislation by
replacing outdated terminology with plainer language, harmonizing it with other
regimes and taking out excessively prescriptive details; second, to make it
consistent with federal regulatory policies, reducing reliance on regulations
and permitting alternative approaches such as compliance agreements, performance
standards, and voluntary industry codes, which are much more consistent with
today's regulatory practices; and, third, to contribute to the economic
performance of the marine industry by reducing prescriptive elements and the
administrative burden imposed by the current legislation. This reform gives the
industry the assurance it needs to increase safety and business.

The chief registrar of all commercial vessels is given the flexibility to
divide the registry into parts, including a small vessel register. This
flexibility allows the chief registrar to set requirements based on the class of
vessels. For example, a vessel on the small vessel registry would not
necessarily be required to undergo costly tonnage measurement, nor would there
be provision to register a mortgage.

Bill C-14 clarifies the shipmaster's responsibility to ensure that the vessel
is adequately staffed with properly qualified and trained personnel. Also
clarified is the master's authority to maintain good order and discipline
on-board a vessel.

In response to stakeholders' concerns, the right of seafarers to place a lien
against a vessel for unpaid wages remains in this bill.

Part 4 of this bill is primarily concerned with safe design, construction,
inspection and operation of vessels, all of which are the responsibility of the
Minister of Transport. Those matters relating to the safe use of pleasure craft,
including requirements for operator competency, licensing and safety equipment,
rest with the Minister of Fisheries and Oceans and can be found in Part 10.

Bill C-14 allows Canada to fulfil its international obligations respecting
various international conventions, such as safety of life at sea and the
International Safety Management Code, by allowing the department to implement
these instruments via regulation.

Commitment to marine safety and protection of the environment has been
reinforced by Canada's commitment to port state control. This means that whoever
comes into our ports can be inspected, no matter what flag they fly. More than
25 per cent of all vessels that dock at Canadian ports are inspected, with the
focus being on ships with the greatest potential safety concerns.

I want to point out clause 227, which stipulates that vessels that contravene
international conventions relating to safety and the environment can be denied
access to Canadian waters.

Transport Canada and Fisheries and Oceans officials have worked closely with
all interested parties to ensure that the proposed legislation's
pollution-prevention provisions are modern and are consistent with other
domestic and international standards. The departments have also worked together
to ensure that the penalties for non-compliance are effected.

Part 8 clearly identifies the responsibility of the Department of Fisheries
and Oceans to protect the marine environment from the discharge of a pollutant
from a vessel or an oil-handling facility engaged in the loading or unloading of
a vessel.

In cases where a pollution accident occurs, the Department of Fisheries and
Oceans will take the lead to ensure an appropriate response. Fisheries and
Oceans is also responsible for ensuring that oil-handling facilities have
oil-spill prevention plans in place and that there is an arrangement for a
response with a Coast Guard certified response organization to control the
consequences.

The Minister of Transportation is responsible under Part 9 of the bill for
the regulation of the discharge of pollutants from vessels. This part also
includes the regulation-making authority for the safety equipment that must be
on-board a vessel when it is carrying pollutants.

The legislation also provides sufficient deterrents to those who would be
tempted to use Canadian waters as the dumping ground for their shipboard waste.

It is clear that industry supports the departments as they move toward a
brand new Canada Shipping Act.

We have heard an outline on the provisions of this bill, the compelling
reasons for it and its many strengths. We have heard about the consultative
process that has made this legislation possible.

Honourable senators, even though industry for the most part is in favour of
the proposed legislation, some will remain in opposition to the enforcement
scheme. It is to this scheme that I would like to focus your attention.

Bill C-14 will establish a streamlined administrative enforcement scheme. It
will use modern, cost-effective means to secure compliance with regulatory
requirements. Transport Canada has listened to the stakeholders in respect to
this enforcement scheme. Originally, the draft bill proposed an administrative
penalty scheme that involved the use of assurances of compliance, tickets,
administrative penalties and judicial sanctions. Some stakeholders thought that
these sanctions were too strong. As a result, the bill before us makes greater
use of the summary conviction process for offences, and it no longer has a
ticketing scheme.

Honourable senators, the Department of Transport is committed to work with
its partner agencies to ensure that the enforcement measures contained in this
bill are applied consistently. This bill represents a conscious effort to hold
all individuals who are responsible for non-compliance accountable for their
actions, including corporate leaders. No one should be able to hide from
personal responsibility behind the corporate screen.

The proposed system contained in this bill is fair. It provides for a more
efficient, less costly alternative to the courts. It provides for an alternative
to financial sanctions through the use of assurances of compliance.

This system is based on the successful program of administrative penalties
developed in the Aeronautics Act, the Agriculture and Agri-food Administrative
Monetary Penalties Act and the Competition Act.

In addition, the administrative system contains safeguards for those that
become subject to enforcement measures. A fair and impartial review process by
an independent adjudicator is also established under this bill.

The Bill C-14 enforcement scheme employs a graduated approach to
non-compliance. This graduated approach provides the government with the
flexibility needed to apply the most suitable enforcement response at a lower
cost to all parties.

Honourable senators, I now turn to an aspect of the economic regulation of
shipping and navigation, namely, the Shipping Conferences Exemption Act.

Amendments are found in Part 15 of Bill C-14. Honourable senators, Part 15
addresses an important aspect of transportation supporting the Canadian economy,
the movement by ship of Canada's overseas containerized trade. A shipping
conference is a group of ocean shipping lines acting collectively to set the
rates and to offer services on specific trade routes. Shipping conferences are
recognized throughout the world and contribute to reliable service and stable
rates.

(1540)

Many of Canada's trading partners, such as the United States, Europe,
Australia and Japan, accommodate conferences through special legislation.
Recently, they have reviewed their conference legislation and concluded that,
while it should be retained, more competitive provisions can be accommodated.

The Shipping Conferences Exemption Act exempts shipping conferences from
certain provisions of the Competition Act and sets the rules for their
operations. Amendments are now required to keep Canada's shipping conference
legislation in balance with Canada's major trading partners. The government must
be mindful of the need for a balanced approach to conference legislation.
Radical anti-conference measures are a departure from compatible, international
rules and could result in unfavourable repercussions for Canadian industry and
Canadian ports.

Honourable senators, the amendments will encourage a more competitive
operating climate within shipping conferences, will provide adequate flexibility
for shippers in dealing with conferences, and will streamline the administration
of the act.

More specifically, during the review of the bill at the Standing Committee on
Transportation and Government Operations and as a result of additional
consultations with Canadian shippers, a motion to amend the clause of the bill
on service contracts was adopted to clarify that the service contract shippers
entered into with individual conference lines will not be subject to
interference from the shipping conference.

Honourable senators, the amendments will result in Canadian legislation being
comparable with the law in the United States. Shippers will benefit from the
injection of greater competition into the practices of conferences, while
conferences will continue to have a limited exemption under the Competition Act.

Honourable senators, politics is the art of the possible. We have practised
that art, balancing the needs and concerns of Canadians with different
interests, protecting the environment and those who work at sea. The result is
an effective piece of legislation that will replace an act long overdue for
renewal and give Canadians the modern, efficient framework we need for the 21st
century. I urge honourable senators to support this legislation.

Hon. Nicholas W. Taylor: Honourable senators, I have a couple of
questions. First, we are increasingly using dredges. In the past, dredges were
used to clean out a harbour, but now they are being used on inland lakes in
Canada, particularly in Western Canada where the water contains silt because of
the farming patterns of the last two or three generations. Will dredges fall
under the Ministry of Transport? If my honourable friend does not know, I can
wait for a response. This is not critical.

Senator Callbeck: Dredges are not covered under this particular piece
of legislation.

Senator Taylor: My second question references the hobby sailor. In the
U.S., one cannot dump effluent from a boat's sewage tank; yet dumping is allowed
in Canadian waters. In Western Europe, one cannot empty a sailing boat either,
except maybe in the Mediterranean, in a few areas off Turkey, Egypt and Israel.
Canada is one of the last countries where one can dump one's holding tank. Has
that practice been changed at all?

Senator Callbeck: Yes. There are measures in this legislation to deal
with that matter, making the rules more strict.

On motion of Senator DeWare, for Senator Forrestall, debate adjourned.

Resuming debate on the motion of the Honourable Senator Kirby, seconded by
the Honourable Senator Mahovlich, for the second reading of Bill S-19, to
amend the Canada Transportation Act.—(Honourable Senator Poulin).

Hon. Marie-P. Poulin: Honourable senators, I listened carefully to the
speech of our colleague Senator Michael Kirby when he tabled Bill S-19. This
bill would amend the Canada Transportation Act and, when implemented, would
provide guidance on how the best interests of the air-travelling public could be
served. Senator Kirby is to be lauded for bringing forward this measure. Bill
S-19 would compel domestic and foreign air carriers to file information
affecting the public interest, such as flight delays, mishandled baggage and
over-sales.

Once enacted, this bill would provide information that could lead to improved
service to air passengers who, as anyone in this chamber knows, have suffered
undue inconvenience in their travel plans because of airline practices.

[Translation]

Honourable senators, we all care about the reliability of Canada's air
transportation system. Bill S-19 seeks to improve services provided to
passengers.

When a passenger chooses a flight to reach a destination, he or she expects,
even if the weather does not co-operate, to leave on time from the planned point
of departure. He or she also expects to arrive at the scheduled time and,
finally, he or she expects to get there with his or her baggage. If the airline
company does not meet these three expectations, the passenger pays a
professional and/or a personal price, in addition to the airfare.

Honourable senators, under Bill S-19, all air carriers in our country would
be required to file reports on matters affecting the public interest. It is
essential to improve the reliability of services to passengers, at a time when
new technology is helping to improve the effectiveness of all industries, and at
a time when air transportation is becoming an essential mode of transportation
in the context of globalization.

[English]

The Hon. the Speaker pro tempore: Is it your pleasure,
honourable senators, to adopt the motion?

Resuming debate on the motion of the Honourable Senator Gauthier, seconded
by the Honourable Senator Fraser:

That the Rules of the Senate be amended, by adding after Rule 90, the
following new Rule:

90.1 Within 90 days of the presentation of a report from a select
committee, the government shall, upon the request of the committee, table a
comprehensive response thereto.—(Honourable Senator Lynch-Staunton).

Hon. John Lynch-Staunton (Leader of the Opposition): Honourable
senators, I congratulate Senator Gauthier for having brought forward a motion
asking the government to table a comprehensive response to committee reports,
once they have been presented.

A careful reading of Senator Gauthier's motion, however, with his agreement,
indicates that it might be improved with an amendment.

(1550)

[English]

As the motion presently reads, although it is well-intentioned, I do not
think it goes far enough. It says, "Within 90 days of the presentation of a
report from a select committee, the government shall, upon the request of a
committee..." I do not think that the committee itself should have the
authority to ask the government to comment on a report the Senate has not voted
on. I do not think the government would be very pleased to see that only a few
senators would impose on it such a project of replying to a report that the
Senate itself has not had a chance to debate and vote upon.

Hon. John Lynch-Staunton (Leader of the Opposition): Honourable
senators, I have discussed this with Senator Gauthier, and he has agreed that
the following amendment would meet his objectives and would show the government
the seriousness of the change in the rules that he is proposing.

I move, seconded by Senator Gauthier, that the motion be amended to read as
follows:

Ninety days following the passage by the Senate of a select committee's
report, the government shall table, at the Senate's request, a comprehensive
response.

We are substituting "Senate" for "committee," and it is a report that the
Senate has approved that would be the object of a referral to the government for
a response.

I also think, out of courtesy to the Rules Committee, should this motion as
amended be approved, that it should be referred to the Rules Committee for
comment and suggestions if need be before it is incorporated into our rules.

The Hon. the Speaker pro tempore: Is it your pleasure,
honourable senators, to adopt the amendment?

[Translation]

Hon. Eymard G. Corbin: Does Senator Lynch-Staunton believe that this
chamber may impose an obligation on the government?

Senator Lynch-Staunton: No, I do not. However, it is a request which,
if approved by the Senate, the government would be ill-advised to refuse.

Hon. Jean-Robert Gauthier: Honourable senators, the inspiration for
this motion came from my experience in the House of Commons. I have copied down
almost word for word Standing Order 109 of the House of Commons. I will read it.

Within 150 days of the presentation of a report from a standing or special
committee, the government shall, upon the request of the committee, table a
comprehensive response thereto.

That is what the Standing Orders say. I have used this standing order, and I
think it is useful. One thing we must not lose sight of is that the Senate does
some wonderful, serious and productive work in committee. When a committee
tables a report in the Senate, this report may be debated. I accept Senator
Lynch- Staunton's proposed amendment. I would like the government, after 90 days
or 150 days, to table a comprehensive response to the committee's report.

I neglected to raise a number of points yesterday when I opened the debate on
this motion. I will do so when the committee considers the motion. I am aware of
the problems which exist. Senator Lynch-Staunton's amendment broadens the scope
of the request. The government must take this seriously and table a
comprehensive response within 90 or 150 days.

When I say 90 or 150 days, some people may wonder whether these are calendar
days or sessional days? I am speaking of calendar days.

In the event that Parliament is prorogued, would the government be, or feel,
obliged to table a response? I think that it would, but we will discuss this in
committee, and that is where we will give thought to amending the motion after
serious debate. Basically, I think that this is an important issue. If we wish
to enhance the value of the Senate's work, we must make that work known. The
government must know that we have ideas, which are important to us.

This request is reasonable. It is entirely within the spirit of a bicameral
Parliament. The Senate is an important chamber, and the government should be
required to respond seriously to the requests of the Senate.

[English]

Hon. Noël A. Kinsella (Deputy Leader of the Opposition): Honourable
senators, I should like to recommend to the house a manner in which we might
consider proceeding on this. If the question is put, the amendment of Senator
Lynch-Staunton would be to amend the main motion. We could then not call the
question on the main motion but allow a motion to be put forward to send the
motion as amended to the Rules Committee.

[Translation]

Senator Corbin: Honourable senators, Senator Gauthier has said this
measure was inspired by the rereading of the Standing Orders of the House of
Commons. I want to reread my question to the Leader of the Government in the
Senate on January 31 of this year, and I quote:

Honourable senators, I have a question for the Leader of the Government in
the Senate. Surely, the leader will have fresh in her memory the work we did
on the committee over which she presided, the five-year review on palliative
care.

I introduced an amendment to the committee report in the last session of
Parliament (that is the preceding Parliament). The amendment was adopted at the
same time as the report, in which we called on the Minister of Health to react
within six months to the committee's recommendations.

I will spare you the rest of the question. It was not the first time I had
raised this matter in the Senate. I think that my honourable colleagues and
Senators Gauthier and Lynch-Staunton have sufficient reason for wanting such a
proposal to be incorporated into the Rules of the Senate.

(1600)

The government's fate is not dependent on this chamber. If, following a
unanimous and collective request from the Senate, the current government did not
respond to the report that we are presenting in this chamber, it would do so at
its own risk. I think this is what Senator Lynch-Staunton means.

Strictly speaking, the government probably does not have to respond to our
reports. However, I know for a fact that Senate reports are carefully examined
by government authorities, public officials and members of the general public
who take an interest in these issues. It remains to be seen whether the
Committee on Privileges, Standing Rules and Orders, to which we are referring
this issue, will produce a report and require the government to respond to it.
Personally, I doubt it. From a legal and constitutional point of view, I do not
think that the government is required to respond, but I believe it will finally
want to do so. It should have done so a long time ago.

This is a contradictory situation, because the Leader of the Government in
the Senate, Senator Carstairs, was the Chair of the committee that reviewed
palliative care. She is now responsible, at the Department of Health, for the
whole palliative care issue.

The report was submitted in June. Six months have gone by and we have still
not had a reaction from the department. We all know that it is ultimately the
department, headed up by the minister, which will react to our reports.

I hope that not only will we have a response within a reasonable time to the
Senate's decision in the last Parliament, but that the government will want to
react to all of the Senate's reports. I approve of this initiative.

[English]

The Hon. the Speaker pro tempore: Is the house ready for the
question on the motion in amendment?

Hon. Senators: Agreed.

The Hon. the Speaker pro tempore: It is moved by Senator
Lynch-Staunton, seconded by the Honourable Senator Gauthier, that the motion be
amended to read as follows:

90.1 Ninety days following passage by the Senate of a select committee's
report, the government shall table, at the Senate's request, a comprehensive
response.

Is it your pleasure, honourable senators, to adopt the motion in amendment?

Hon. John Lynch-Staunton (Leader of the Opposition): Honourable
senators, to my understanding, we are actually changing the rules. It should be
indicated to the Rules Committee that we want it to study this matter. It is the
responsibility of the Rules Committee to give us indications on what rule
changes we should entertain. If we do it separately from the approach to the
overall rules, we could get ourselves into a sticky situation.

Honourable senators, I move that the wording of the motion, as amended, be
referred to the Standing Committee on Privileges, Standing Rules and Orders for
consideration and for report at the earliest opportunity.

The Hon. the Speaker pro tempore: Is it your pleasure,
honourable senators, to adopt the motion?

Resuming debate on the inquiry of the Honourable Senator Moore calling the
attention of the Senate to the emerging issue of deferred maintenance costs in
Canada's post-secondary institutions.—(Honourable Senator Andreychuk).

Hon. A. Raynell Andreychuk: Honourable senators, I wish to add my
words to this inquiry initiated by Senator Moore calling the attention of the
Senate to the emerging issue of deferred maintenance costs in Canada's
post-secondary institutions.

I have spoken in this chamber at length on at least three occasions as to the
need to continue to reinforce our post-secondary education in Canada. As
senators will recall, it was sometime in 1995 that Senator Bonnell initiated an
inquiry that we look into post-secondary education. At that time, it was
difficult to get many of the parliamentarians in Canada, and other people in
Canada, to focus on post-secondary education. The Senate again displayed that
its committee work is extremely important because by the time we finished our
study and filed it in December 1997, post-secondary education had caught the
attention of many groups across Canada and, in fact, the government of the day.

I do not want to go over that report in any great detail, but I think it
fundamentally touched the crisis that students faced in post-secondary
education, as the costs had accelerated in a manner that had not been seen
before. There was great concern by the Post-Secondary Education Committee that
students were having difficulty continuing their post-secondary education and
that the quality of education and the availability of education to our students
was in general jeopardy.

At the same time, we brought to the attention of the government and other
senators that research in Canada was behind and, due to cutbacks and other
issues in Canada, post-secondary education was not getting attention. We, as a
country, who prided ourselves as being exporters of innovation and service
technology, were in fact falling behind other OECD countries and were not
leading as we had in the past. There was considerable concern that research was
being neglected. There was considerable concern that students were not being
given the type of international education with which they could meet the demands
of the global economy and the more globalized world.

Honourable senators, I am pleased to see that our report received the full
endorsement of the Senate. It is too bad that the government did not reply in
whole to our report. However, I do see an inkling that the government paid
attention to it because from time to time we see initiatives. As we heard
earlier today, an innovation fund is being set up to deal with some of the
research and technology crises that we are facing.

My concern is that we continue to deal with post-secondary education on an ad
hoc basis. I believe it is time that the government approached the issues and
the problems facing post-secondary education in a more systematic way.
Therefore, I am very pleased that Senator Moore called attention to the deferred
maintenance costs of Canada's post-secondary institutions. It seems to me that
when the cutbacks came, the first things that was put on the back burner were
repairs to institutions and purchases for our libraries that were absolutely
necessary.

As a committee, honourable senators, we travelled across Canada. We were
still being told by some government officials that there were still some
efficiencies that could be made in the institutions and that there was
sufficient money to attend to the ongoing operating costs.

(1610)

However, I think the committee was convinced by the well documented
presentations of university administrators and student organizations such as
CAUT and AUCC that all efficiencies had been attacked and that the crisis was
beyond that point. We were told that unless there was a systematic study and an
injection of funds into post-secondary education, post-secondary education
would no longer exist in the way that we enjoyed it.

I should like to refer to our December 1997 report at page 17. I will not go
through the statistics because it is important that those who will be following
this issue go back to our report and to the supporting material, of which there
was much.

At that time, the committee unanimously said that universities and colleges
across Canada have responded to the dwindling commitment of government resources
in a number of ways. They have become more efficient and have eliminated a lot
of waste from their operations. The operating costs of universities in the
1980s, for example, fell by 15 per cent on a per student basis. Since then,
however, operating costs per student have risen, influenced by the costs of
increasing salaries for a maturing professoriate and of early retirement
packages to reduced faculty complements.

Post-secondary institutions have also responded to declining government
support by postponing capital projects and by reducing the replacement and
repair of facilities as well as routine maintenance to the bare minimum. The net
result has been the undeniable rundown of the physical infrastructure of
universities and colleges.

The intellectual infrastructure has suffered as well in constant dollars per
student. By 1993, library expenditures had fallen by 20 per cent from their peak
in the early 1970s. Therefore, the special committee recommended that the
federal government begin negotiations with the provinces on a joint program to
arrest the accelerating deterioration of the fiscal infrastructure and of
libraries, colleges and universities, that the institutions be asked to maintain
an up-to-date list of their overdue maintenance and renovation needs, and that
the two levels of government commit funds to these projects at the earliest
possibility.

Honourable senators, the Canadian Association of University Business Offices
has continued to document the shortfall. In fact, the report of the Canadian
Association of University Teachers, to which Senator Moore referred, is another
example. The evidence is clear that the infrastructure is in need of repair. The
moneys that have been allotted have been used to stem the decline, but they have
not met the needs of the universities.

Some universities are concerned that the money that is being injected through
these programs and through the initiatives that we heard about in the innovation
fund are going for new research facilities, new technologies and new innovative
centres. While we commend the government for providing money to put us on the
cutting edge of new technologies, the universities need sustaining money. Money
going to applied research is not sufficient. Money is needed to sustain the
university base and to sustain basic research.

We do not want to be in a position of having some highly technical
specialities while having lost the raison d'être of universities, which is to
build minds and capacities in our young people to enable them to meet the
challenges of the future.

The approach of most universities to education is to expand minds one student
at a time. To do that, a liberal education has been the hallmark of the Canadian
system, and that must be reinforced. We cannot say that only computer science is
important. We must ensure that all the other humanities and all the basic
programs are also sustained. I do not believe that there has been a systematic
study of university funding to ensure a balance between applied research and
basic research and to ensure that new technologies are weighed against
traditional, basic programs. We must consider the type of students attending
particular institutions and their ability.

When we did our study some years ago, we noted that literacy was a problem in
the university system and that we needed to reinforce programs for incoming
students. We recognized the fact that many Aboriginal peoples in the West were
entering our university systems. It is imperative that they be given
opportunities. However, some university practices and procedures did not fit
them very well. Therefore, we needed to review some of the basic entrance
requirements and funding requirements for these students.

I want to emphasize that increasing funding in innovative areas is fine, but
it must be done across the spectrum of universities. We must consider how that
can be done.

I know that in Saskatchewan some moneys returned from the federal government
to the provincial government did not translate immediately into funds in the
hands of the universities. We must ensure that the governments work
cooperatively to sustain universities.

At page 59 of the report to which I referred earlier we said that overall
Canada's post-secondary education network is adjusting remarkably to the rapid
changes with inadequate resources. This process is not tidy, but chaotic and
stressful, and it is being driven up more by grass roots than by top-down
forces. I wish to underscore that point in supporting this inquiry. Good minds
across Canada have found ways to sustain universities. However, is this good
enough in this century if we want to be competitive and produce students who can
meet the challenges? Although we need a grass roots-up approach, we also need to
take a top-down systematic look at this issue.

In 1997, we did not conclude that there was a crisis yet in our
post-secondary system, but we did find that there were good reasons for concern
and action. I believe that the crisis has now arrived. Statistics show that our
attempts to redress this problem have not been successful in any corner of
Canada.

I noted that in two Throne Speeches the government addressed post-secondary
education, innovation and research, but at that time talked about centres of
excellence and partnering to see how industry could collaborate with
universities and governments to meet the needs of the 21st century. The
difficulty at that time was that the corporate money was tied to federal
government money.

(1620)

This almost precluded a province such as Saskatchewan, which has a very small
corporate base from which to draw. Naturally, those funds seemed to go to what,
in the government's terms, were the centres of excellence: Toronto, Montreal,
perhaps Vancouver, Calgary and Halifax.

We pointed out in our report that there should be a different definition of
centres of excellence. Universities across this country have brought to each one
of their communities a centre of excellence.

I think of Walter Scott, the first premier of Saskatchewan — and I might note
he was a Liberal — and his foresight to locate a university in Saskatchewan in
1911. The voice from Central Canada was to scoff at him, to say it was premature
and unnecessary. However, the foresight to put a university in Saskatchewan
targeted to agriculture created and sustained the viability of our communities.
Many researchers who began in Saskatchewan were world renowned and have moved on
to some of the best universities around the world. Centres of excellence should
exist in each one of our communities.

I see the same kind of intellectual curiosity and capability in the student
and professorial bodies of our smaller universities.

The Hon. the Speaker pro tempore: Honourable Senator
Andreychuk, your speaking time has expired. Are you seeking leave to continue?

Senator Andreychuk: Yes, I would request leave to continue. I am
nearly at the end.

Senator Andreychuk: I make the point seriously that all universities
systematically look to the government for support and reject the idea that there
is a need to reinforce the major centres at the expense of the smaller ones.

Honourable senators, universities bring vibrancy to our smaller centres in
the fine arts, education and the intellectual base. This improves the quality of
life of the citizens in these centres and is probably more important than even
in our larger centres.

I can use the example of the Saskatchewan Indian Federated College. This
institution is not based in one of our major centres. However, the fact that
there is a First Nations university controlled by the Aboriginal peoples in
Regina has brought a wealth of education to the Aboriginal community, has
promoted understanding between the Aboriginal and non-Aboriginal communities,
and has gone a long way toward bringing these communities in Saskatchewan
together. It is a world-class Aboriginal institution that has become a model in
South America, Central America and elsewhere. I should like to underscore that.

I also wanted to make a final point. All of us must take some time to
understand what our universities mean to the lives of those of us who live in
Canada. Universities promote intellectual debate and intellectual curiosity. If
I can use our Senate committees as an example, when we study a topic, we try
very hard to ensure that we hear from witnesses across Canada. Inevitably, a
wealth of information and knowledge comes from university professors, research
students and Ph.D. graduates from across this country. When our reports are
framed, they speak to all of Canada from all of Canada. That process could not
take place if we did not have a viable university base.

I have wandered a bit from the topic. I am sure Senator Moore will forgive
me, but I wanted to associate myself in this inquiry with his call to study what
he calls the emerging issue and what I call a longstanding issue. Many senators
have spoken to this issue. I hope that we can do something to call attention to
a more systematic way of addressing the long-term viability of our universities.

That he will call the attention of the Senate to Canadian agricultural
issues, specifically grain, dairy and hemp.

He said: Honourable senators, thank you very much.You might consider holding
your applause until you know whether you are disappointed or not with my maiden
speech.

I am a fourth generation farmer. I cannot tell honourable senators how
privileged I feel at this time and in this presentation to commit to making
every effort toward the well-being and the future prosperity of agriculture.

I am always asked the question: Do I own Tunney's Pasture? The answer is, no,
I do not.

Senator Graham: Not yet.

Senator Tunney: It is a fact, however, that my great-uncle did own it,
starting in the year 1838. He was a lumber baron there for many years.

Honourable senators, food is the most important commodity in the world and
our very existence depends upon it. That is why our farmers play such a pivotal
role in putting food on the tables of the world, and, in doing so, bringing true
value to the Canadian economy.

We are, however, faced with the reality that there are fast becoming so many
problems that fewer people know how to grow environmentally friendly food or
know how to grow it under our extreme and diverse conditions, as compared to
many other countries.

With the current economic hardships encountered today by the grain and
oilseed producers across the country, both the federal and provincial
governments are faced with the daunting task of designing assistance programs
that are both meaningful and trade-neutral.

Statistics released by the Urban Renaissance Institute, a division of the
Toronto-based environmental watchdog Energy Probe, indicate a grim scenario.
From 1990 to 1999, the federal and provincial governments contributed $3.55 in
subsidies for every $1 earned by Canadian farmers.

Support and protection for farmers in developing countries now exceeds $360
billion. In 1999, American wheat producers received 46 per cent of their gross
revenue from subsidies. The EU accounted for 58 per cent and Canada came in at
11 per cent.

In Canada, we generate approximately $95 billion a year and employ roughly
1.9 million people. We have reached the $23- billion trade level. Agriculture
and agri-food make up 25 per cent of our trade surplus. Only 10 per cent of our
total disposable income goes to buy groceries. In the U.S., it is 10.4 per cent;
in Australia, it is as high as 14.1 per cent.

(1630)

This morning, the Standing Senate Committee on Agriculture and Forestry heard
a witness from Stettler, Alberta. He made two dramatic statements. First, he
said that a waitress in a hotel or a restaurant receives a gratuity that exceeds
the total amount that a farmer receives for all the produce that the customer
ate after having ordered it from the menu. Second, he told us about a neighbour
of his who is a fourth generation farmer. The farm has been in his family since
1906, but the next generation will probably be dispossessed unless prices turn
around.

Another matter that bothers me to no end is that producers are the only
people anywhere in the food chain who are price takers and not price
determiners. They take the price for their food, for their produce. The
transporters set their rates. The processors have their margin. The distributors
and the retailers know how much they need to turn a bottom line.

In a recent presentation to the Standing Senate Committee on Agriculture and
Forestry, Mr. Ken Ritter, Chairman of the Canadian Wheat Board, stated that:

...when it comes to world agricultural trade issues, the most important
factor to fairer trade is a level international playing field. Export and
domestic subsidies continue to distort world grain production, subsequently
depressing world prices.

I share his view. I believe that the WTO is and should be our vehicle to lead
to freer and fairer trade.

Honourable senators, the Canadian Wheat Board operates on behalf of farmers
when selling their grain, which is why in 1998, after much criticism, the Wheat
Board had farmers in 10 districts across Western Canada elected to represent
them. They, along with five government appointed directors, now comprise the
board of directors. Their aim is to keep in tune with the farmers' needs, and
they are held accountable for the subsequent actions. They are hoping to be
participants at the upcoming international trade talks in November in Doha,
Qatar. I believe it would be an excellent forum for the Wheat Board members, our
Canadian representatives and our Canadian farmers to participate in these
discussions.

Honourable senators, we are faced with increasing challenges in production
and trade. Grain and oilseed producers across Canada are experiencing extreme
difficulties. The ability to share our view on the role of Canada's trade and
trade policy, in particular trade of grain and the WTO regulation of same, would
be, in my opinion, most valuable.

While greater pressures are being applied for supply and demand, more and
more we are seeing an excessive use of fertilizers and pesticides. This can and
does leave the soil continually exhausted. Extensive studies have been conducted
on the short- and long-term results of these effects.

As reported by Dr. Robert Sopuck, Director of Policy for the Delta Waterfowl
Foundation, they are trying to encourage farmers to work their best land and set
some of the less valuable land aside for conservation. Undoubtedly, this would
promote biodiversity and improve water quality.

We must also take into account that even though Canada has enjoyed a
worldwide and consistently high reputation for quality and safety of wheat and
barley, the industry is encountering increased risks and pressure related to the
safety of food. Some examples include tests for fusarium, which is a head blight
in wheat, as well as ergot and mycotoxins, to name only a few. We are also faced
with an extremely complex issue of biotechnology and, more specifically, the
introduction of GMOs, or genetically modified organisms. There are currently
non-transgenic varieties of wheat or barley registered for commercial production
either in Canada or elsewhere.

My copy of The Western Producer came to my office early this morning. In it
was a report that GMO-infected grain is now being intermixed with the non-GMO
grain. Everyone knows that the European buyers will not accept it after it is
tested. This is a very serious problem. I see this as a problem of multinational
corporations. The one which is most upfront with this issue controls not only
the chemical industry but the seed industry as well. They have a monopoly in
those areas. Unless there is some kind of governmental control, they will get us
into all kinds of trouble.

A recent article in The Western Producer indicated that Monsanto Canada has
discovered a gene in one of its GMO canola crops that should not be there. It
was found in Quest canola, marketed by the Saskatchewan Wheat Pool and Agricore,
which has already been sold to approximately 3,000 farmers. I happen to know
that they have been scrambling to try to recover that canola before the farmers
plant it in the ground. The latest report this morning says that they have had
some success in recovering it. According to Monsanto spokesperson Trish Jordan,
the gene was never intended to be in varieties for farmers.

Honourable senators, I want to turn to another commodity, one that is of
prime interest to agriculture and Canadians. I refer to hemp. The issue is of
extreme interest to agriculture. It is an industry that holds great promise.
However, in my view, it is an industry that does not have a federally regulated
long-term plan, nor does it receive government assistance. Legislation that
would bring in orderly regulations while offering an adequate processing and
marketing plan would also help. We must also be looking to garner a more secure
— not only Canadian — worldwide market for this most versatile commodity.

Much time and effort has been expended in discussing the industry, but not in
the development of long-term government- approved programs aimed at the
producers and their specific needs and requirements. We must go beyond looking
solely at the timing and the planting of seeds. We must look at what is being
done to produce the hemp once it is ready for market. Many producers have barns
filled with bales of rolled fibre and tonnes of high-quality seed unsold simply
because of an improper marketing strategy.

Friends of mine, Gord and Cathy Wilson of Campbell's Cross, Ontario, who are
in our gallery today, have 500 bales of hemp in perfectly good condition. It is
a valuable commodity, if handled properly. They have grown this crop over the
course of two years. They have had to stop growing because they cannot
accumulate year-after-year production with no hope or no possibility of buyers
or an industry that will further manufacture this crop.

(1640)

They have been faced with the matter of applying for and purchasing a permit
from the federal Department of Agriculture and yet another one from Health
Canada. Before they ever decide that they can grow the crop, they must cross a
couple of hurdles. Not only must they do that the first year they want to grow
hemp, they must do the very same thing the next year as if they were brand new
growers.

Honourable senators, the inability to receive proper and timely licensing is
a major factor. There must be a simpler way for this process to be accomplished,
rather than having individual licence requirements for both the purchase of
seeds and the growing of the crop. The rigorous enforcement mechanisms built
into the regulatory framework are, for the most part, a hindrance and are
certainly a deterrent to many growers or potential growers.

In conclusion, I referred in my opening statement to the development of
agricultural processing and marketing plans. I will say much more about this
issue in the days to come.

Honourable senators, I am a dairy farmer, as you probably have heard.

The Hon. the Speaker: Before you go on, Senator Tunney, I regret to
inform you that your speaking time has expired. Are you asking for leave to
continue?

Senator Tunney: Yes, I would be pleased to do so.

The Hon. the Speaker: Is leave granted, honourable senators?

Hon. Senators: Agreed.

Senator Tunney: Thank you, honourable senators.

Canada has the most effective and competitive program for dairy and poultry
production of any country in the world. It is called supply management, and it
works to the benefit of all, from producers to consumers. Producers are assured
of a fair price for the product only if they are producing a highly efficient
and a very safe product. I assure honourable senators that all players are the
beneficiaries of the work and the foresight of a former Minister of Agriculture
and a former member of the Canadian Senate. His name is the Honourable Eugene
Whelan, and he is in our gallery today.

Hon. Senators: Hear, hear!

Senator Tunney: Honourable senators, the idea of Canadian supply
management is a valid marketing system. It is, in my opinion, imperative that
the federal government seek international recognition. It is equally important
that the round of negotiations recognize that the supply management programs do
in fact meet the objectives of the WTO in the provision of a stable and
profitable dairy industry. Our dairy farmers continue to play a significant role
in Canadian agriculture and contribute tremendously to our balance of payments.

The message is being delivered that governments must support the existing
supply policy. Supply management, while meeting the objectives of the WTO,
provides a stable, comprehensive and competitive industry. Many people wrongly
think that supply management is a licence for the producers to print money. It
is not so, and at another time I should like to go into that matter. It is true
that if one buys a basket of dairy products in the U.S. today, one pays more for
that basket than the identical products purchased here at one of our
supermarkets.

Honourable senators, I have had the good fortune to work as a volunteer in
the dairy industry in Russia and Ukraine for several years. It is an experience
that most Canadians would not have. The rewards are in seeing how a small effort
can make such a large difference and dramatically increase the production of
milk, even in a period of six weeks to two months. I have been there seven times
doing this work.

This result comes about by the treatment of infection, mostly mastitis, by
the improvement of feeding practices and by the improvement of their milking
technique. They do not know that putting a milker on a cow and leaving it on for
12 to 14 minutes has a deleterious effect on the cow, and that it causes the
mastitis. The cow is giving four to six pounds of milk, and 20 to 30 seconds
after the milker goes onto the cow, the cow is milked out. Our Canadian cows are
giving an average of 80 pounds of milk a day, and the milkers can do that in
three to four minutes.

Russian and Ukrainian milking equipment is of 1930s vintage and must be
replaced. Canada could play a large part in helping to develop agricultural
infrastructure. If agriculture in Ukraine and Russia could be improved and if
their economies could be brought up to some semblance of prosperity, Canada
could be the beneficiary of 50 years of trade with two of the very best trading
partners in the world.

There are 200 million people in Russian and Ukraine, and they live in total
and abject poverty. After working with these wonderful people, I dare to predict
a great future for them.

Senator Tunney: Yes, I would be happy to do so. I just hope that I
know the answers.

Senator Poulin: Honourable senators, I wish to compliment Senator
Tunney for an excellent presentation to this chamber. Few issues can be of more
direct interest to Canadians than our ability to provide top-quality foodstuff
at reasonable prices.

The senator touched on many important topics, and I should like to hear from
him on what appears to be a contradiction. There is an apparent excessive use of
fertilizers, while at the same time fertilizer cost is escalating rapidly. In
other words, would high cost not lead to diminished usage? What are the
alternatives, Senator Tunney?

Senator Tunney: I thank the honourable senator for the question.

Honourable senators, this was a subject of discussion at our Agriculture
Committee meeting this morning. We were told, and it was not a surprise to me,
that because of the very high cost of natural gas, of which the fertilizer
industry is a very large user, the cost of nitrogen fertilizer has increased by
300 per cent since last August. What does a farmer do when faced with that kind
of a cost in addition to the almost tripled cost of fuel for his machinery and
the need to get as much production from his land as possible?

(1650)

If the value of his wheat, his corn, his canola, his soy increased at the
same rate as his input costs, he would probably say there was no problem. The
problem really is this: What happens to our markets when we have to add another
100 per cent to the wheat that we want to ship overseas to our world customers?
This is the real dilemma.

I wish that the farmers in the Prairies and elsewhere, of course, had the
same bottom line as the gas and the oil companies. I am afraid not.

Senator Poulin: The honourable senator's speech also reported on the
situation in the dairy industry. I should like to acknowledge his expertise in
this area. While there has been great success in the supply management of dairy
products, I wonder, though, how this relates to the fact that supply management
works when imports are controlled in an era of free trade. What mechanisms exist
to rationalize the two?

Senator Tunney: This is another conundrum for many of the people with
whom I interact. In trade, Canada has always had a foreign market for skim milk
powder. We never did sacrifice price to effect those sales because the demand
was there from Iran, Iraq, Saudi Arabia and the many African countries and
Mexico. Mexico was, for a long time, the largest buyer of Canadian skim milk
powder. Our powder went on the market because it was absolutely proven to be the
purest in the world. When I say that, I am referring to the absence of any
antibiotics in that milk powder.

Many people do not pay much attention to the fact that Canada and the U.S.
have always had a good trading relationship in dairy products — not fluid milk,
of course; it is a perishable product. Canada makes 108 different varieties of
cheese. The U.S. produces a much smaller variety of cheeses, but they make a
much larger volume. Canada and the U.S. have had a trade agreement with quotas
on the import and the export of dairy products for years and years. Usually,
both countries fill those quotas.

There was never a problem until the U.S. tried to exceed the quota. They
started doing that, believe it or not, by adding rock salt to skim milk powder
and shipping it in here. Why? They used 51 per cent rock salt and 49 per cent
skim milk powder because, under the WTO, which was the GATT, anything with less
than a 50 per cent dairy ingredient could be shipped in here. They used rock
salt so that, as soon as it got here, the rock salt could be sifted out and sent
back to the U.S. That salt would be mixed again with skim milk powder for the
next shipment.

Therein lies the problem of a country, in its greed, trying to find ways
around rules. You may or may not know right now that the U.S. and New Zealand
are taking Canada before the WTO on the matter of maintaining exports to our
traditional country buyers that we have always had. That is a not-so-brief
outline of the situation.

Hon. A. Raynell Andreychuk: Honourable senators, I, too, want to
compliment Senator Tunney for his presentation and his interest in agriculture,
an interest that is very welcome from the West.

We were also fortunate to hear Senator Tunney at the Foreign Affairs
Committee speak on the Russia-Ukraine situation. It was very helpful.

In the more than 20 years that I have followed this, I have been puzzled by
the fact that with respect to GATT and WTO our arguments vis-à-vis continuing
our marketing system and our Canadian Wheat Board have not been accepted by our
European colleagues or the Americans.

At each round of trade talks, we have not been successful in moving the
Europeans from their position. They argue that the Canadian Wheat Board
represents a subsidy and that unless we are prepared to remove that impediment
they will not negotiate any real meaningful movement of their positions.

Senator Tunney is an expert in this field. I hope he is in a good position to
get the ear of the government.

Can the Honourable Senator Tunney tell us what we should be doing differently
in our negotiations with the Europeans in this area if we wish to be more
competitive and to maintain the markets that we have?

Senator Tunney: One must distinguish between the wishes of the
governments and the wishes of the producers. That is often the case. Do not
limit this to agriculture nor to dairy. The American dairy farmers are jealous
of our system. Each time they lobby Washington for our system, they are turned
down. If the Americans were the fathers of supply management, the story would be
different. However, they will not give us credit for the idea of supply
management or a control on production.

Supply management does two things. First, it guarantees a supply of
absolutely high quality. It also guarantees the absence of costly and vicious
surpluses.

The matter in Europe is somewhat different. The Europeans have enough
population to absorb all of their production. We never did sell skim milk powder
or whole milk powder or condensed milk into Europe. We probably never will. We
never should. They should always be self-sufficient. Our real problem is with
the U.S. and particularly with New Zealand.

The Hon. the Speaker: Honourable senators, before calling on Senator
Robichaud and reverting to Government Notices of Motions for purposes of the
adjournment motion, I should like to draw to the attention of honourable
senators that earlier today, under Tabling of Documents, we tabled the report of
the Chief Electoral Officer pursuant to section 72 of the Privacy Act.

For purposes of the Journals of the Senate, I draw to the attention of
honourable senators that that legislation requires such a report to be referred
to the committee designated or established by Parliament for purposes of section
75 of the Privacy Act. Section 75(1) indicates that the matter is to be referred
automatically to the appropriate committee of the house, either the other place
or this place. In the case of this place, the committee to which it will be
referred, and this will be reflected in our journals, is the Standing Senate
Committee on Legal and Constitutional Affairs.